The Late Payments Directive is expected to have a stronger impact than previous legislation, Idaira Robayna Alfonso from the European Commission’s Directorate-General for Enterprise and Industry, told a seminar last week.

More than 170 people representing small businesses and public entities participated in the seminar at Floriana’s Hotel Excelsior. The event was jointly organised by the European Commission Representation in Malta with the Malta Association of Credit Management. It brought together numerous stakeholders to discuss the rationale behind the Directive and its implementation locally.

The Directive, which concerns business-to-business and business-to-government relationships, aims to help businesses maintain a healthy cash flow. Idaira Robayna Alfonso highlighted the cultural differences in the length of payments in Europe, with extremes varying between 25 and 180 days. She congratulated Malta on being one of the first countries with Cyprus, Italy, Ireland and the Netherlands to transpose the new Directive into Maltese law.

Commission Representation head Martin Bugelli explained that the event was part of an information campaign lead by the Commission in all member states to increase awareness among stakeholders, in particular SMEs and authorities, on their new rights under the Directive.

MACM president Louis Bianchi pointed out that throughout Europe authorities are not leading by example, often paying later than business customers. SMEs are the most vulnerable, hence the need for proper implementation of the rights conferred by EU law.

Herald Bonnici, Director-General for Financial Policy and Management within the Ministry of Finance, Economy and Investment, said the average payment duration by public authorities in Malta is 89 days. He gave an overview of the process that led to the transposition of the Directive into Maltese law, from the initial public consultation up to the introduction of Legal Notice 272 of 2012.

MACM director-general Josef Busuttil welcomed the revised Directive as an improvement on the EU’s first attempt at curbing late payments. He pointed out that alone, the Directive would be ineffective unless the causes of late payments are addressed. This, he said, include under-capitalisation, mismanagement and over-trading. It is necessary to change the late payment culture through education, proper credit management information systems, and adequately funded firms. In other words, good credit management practice is key, he emphasised.

The private sector perspective was presented by Simonds Farsons Cisk chief financial officer Charles Xuereb who pointed out that although legislation was not a remedy to the problem, it was a step in the right direction to create an environment conducive to more timely payments. He highlighted the practical difficulties in enforcing the Directive, particularly in Malta, where businesses were often reluctant to charge interest on payments or to seek judicial redress.

There was a lively discussion chaired by Mr Bugelli as participants voiced their appreciation, criticism and suggestions on the legislative initiative, as well as their views on the difficulties SMEs face in asserting their rights in practice.