Business representatives call on differentiating between late payments and long payment terms during discussions on the EU Late Payments Regulation

Last Updated on Tuesday, 27 February, 2024 at 1:54 pm by Andre Camilleri

This week, the Malta Business Bureau (MBB) held a business session in which it presented and discussed with Maltese businesses the European Commission’s proposal for a Late Payment Regulation.

The proposal, which is still being negotiated at EU level, aims to update the current directive to improve the on-time payment culture through more payment discipline in business transactions across the EU, which the Commission says would improve cashflow and potentially save businesses from insolvency, especially SMEs.

Introducing the topic, MBB president Alison Mizzi stated that reliable payment streams are key to a competitive economy and highlighted that deferred or late payments affect businesses across all sectors, with SMEs bearing a disproportionate burden. She acknowledged that late payments cause administrative and financial burdens, which are particularly acute when businesses are in different EU countries and noted that cross-border trade is inevitably impacted.

Malta Chamber deputy president Nick Xuereb asserted that although he agrees with a robust and fair system that supports the interest of creditors, late payments tend to increase in times of crisis and economic turmoil. The inability to meet overheads and operating costs by most SMEs is a circumstance that needs to be acknowledged. He therefore cautioned for proportionality in such circumstances. Xuereb also added that while payment delays have a significant impact on business liquidity and cashflow, there is a crucial need to prioritise teaching effective credit management practices to enhance cash flow and consistently nurture positive customer relationships.

MHRA’s Operations executive, Tonio Cini, emphasised the significance of upholding contractual freedom in business-to-business transactions. He noted that a one-size-fits-all approach to tackling late payments may not be effective, highlighting the diverse challenges faced by hospitality SMEs during various business phases. He expressed concerns over the potential negative impact on these businesses if they are required to adhere strictly to the 30-day maximum payment terms, citing liquidity shortages and increased administrative burdens as key factors. Despite this, he recognised the importance of implementing stricter discipline and consequences for companies that fail to comply with agreed-upon payment terms. He suggested that measures, such as interest on late payments, could discourage abuse of financing terms.

Josef Busuttil, director general of the Malta Association for Credit Management (MACM) noted that it is essential to differentiate between credit terms and late payments. In his view, the proposed regulation has fundamental gaps as it is only tackling the symptoms of late payments rather than solving the problem. Busuttil explained how several non-perishable products have a long business cycle and by nature require more than a 30-day credit term timeframe. Where a good relationship between two trading companies exists, creditors would have no problem granting longer payment terms. This would not be the case where debtors repeatedly default on their payments. Companies are in the best position to assess the risks inherent in their business operations and to make decisions that align with both their own interests and those of their business clients.

Brian Grima, senior manager at the Ministry for the Economy, Enterprise and Strategic Projects agreed that a stronger directive would have been a better choice of legal instrument than a regulation to avoid a one-size-fits-all approach, which does not reflect the different business environments in all EU member states and risks being counterproductive. He confirmed that the Maltese government understands the importance of freedom of contract for the Maltese business community and has advocated this in the EU Council. On the issue of enforcement, he mentioned that the remit of any future enforcement authority, established by the regulation, must also reflect what is rightly needed in each country.

The business session was moderated by MBB EU Affairs manager and head of Brussels Operations, Daniel Debono, who also gave a presentation outlining the key provisions of the EU proposal.

The Malta Business Bureau is the EU business advisory of The Malta Chamber and the Malta Hotels and Restaurants Association. It is also a partner of the Enterprise Europe Network.The business session can be viewed via

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