Terms of payment

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Legal Project

May 12, 2009

Suzanne Haskins

Jelena Radosavljevic

Mohamed Kabadou

Carine Turpin

Albin Pinard

Sandy Rozhaveh Soleymani


Table of Contents
Payment practices in France 2
Payment practices per a few sectors in France 4
Transportation 4
Aeronautics industry 5
French public administration 5
I. French public administration terms ofpayment general overview 5
II. Example of a successful practice: the Languedoc-Roussillon 6
III. Consequences of the decree of April 28th, 2008 7
IV. Delayed payment economic impact on a public sector customer 8
International payment comparison 9
3 groups based on risk of payment 10
Consequences 11
The Law of Modernization of the Economy 12
General scope of terms of payment 12
I. Legalchange 12
II. Prohibitions 13
III. Sanctions 14
Suppliers /retailers relationship 15
I. Legal framework 15
II. Possible economic repercussions 16
Cash flow difficulties 19
First conflicts 19
Problems for SMEs caused by LME 20
Conclusion 21
Appendix/Sources 22

Payment practices in France

The disappointing reality of France’s modern economy and the EU’s economy as well, is the factthat it is becoming progressively more difficult to be paid on time. Companies are taking longer to pay their invoices and consequently this is having a direct negative impact on the current economic situation. This link between late payments and the damage it does to the economy causes a “domino effect”. Essentially lengthy payment delays are weakening a company’s cash flow which can ultimatelyspell financial disaster if not remedied quickly.

Generally speaking, payment delays decreased in 2007 whereas in 2006 it was the opposite. Customer delay of payment decreased from 1 to 2 days depending on the size of the company. The time of payment of suppliers also accelerated. TPEs (0-19) paid their suppliers under 63 days and SMEs (20-249) paid within 67 days whereas mid-sized (250-500)and big-sized companies (>500) paid within 74 days. TPEs and SMEs anticipated LME (la loi de modernisation de l’economie) which came into effect in January of 2009. As a result, the supplier delay was improved however the customer delay did not produce the same outcome. As for mid to big-sized companies, they benefited from LME since their customers paid sooner. However they have not shownthe same respect in paying their suppliers earlier.

Payment delays are greater for companies belonging to a group (all sizes) versus those companies which are legally independent. Belonging to a group, regardless of its size, enables you to have more bargaining power when it comes to payment. As for customer delay of payment, the gap between companies belonging to a group and those that areindependent is smaller.

|Supplier Payment Delay[1] |
| |Subsidiary |Independent |
|SME |61 |40 |
|Big |71|60 |

| |Payment Breakdown[2] | |
| |2007 |2008 |
|Private Individuals |42 |40 |
|Companies |58.6 |55.5 ||Public Sector |68.9 |65.3 |

It was concluded that private individuals are the best payers followed by companies and then public service:

An investigation conducted by Intrum Justitia[3] pointed out that within the last 12 months the risks of not being paid by private individuals, companies and the public sector have actually taken...
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