One of the lesser known elements of the Small Business, Enterprise and Employment Act 2015 (SBEEA) is an initiative aimed at breaking the widespread culture of chronic late payments to suppliers by larger companies. Previous efforts to tackle this problem included a voluntary scheme. Under said voluntary scheme, approximately 250 large-sized companies signed up to produce reports on their payment practices. At the end of the scheme, only a few of these companies actually committed to providing these reports.

Section 3 of SBEEA aims to take stronger action at curbing late payments to small companies who may have little other recourse when their invoices are not timely paid. This section provides that large companies and large LLP’s will have a duty to report on their payment practices. The provision was due to come into force this month (October 2016) but has now been pushed to April 2017.

A large company or large LLP will have to provide this report if they meet the following criteria:

• Annual turnover of over £36 million
• Balance sheet total over £18 million
• More than 250 employees
• Quoted and unquoted companies (not micro, small or medium)

These payment practice reports will published and it will be clear to see which companies are timely with their payments and those that are continual late payers! However, the question unlikely to be answered until the reports are published is if this ‘naming and shaming’ approach will successfully break the late payment culture?

This is definitely one to watch, as smaller companies often are left with no choice but to continue supplying to their ‘larger company’ customers because without them, their businesses would be unable to continue operating. Additionally, any financial penalties for failure to adhere to this SBEEA directive may not be enough to make a significant impact, as the annual turnover and balance sheets of these “large” companies are substantial enough not to feel much “heat” from a penalty.

Under the Companies Act 2006, there are codified duties and other governance requirements that directors have to ensure that they comply with or risk numerous penalties. This new requirement to produce reports of their company’s payment practices is added to the list of a company director’s duties. The benefits of choosing a UK company can often help steer your business in the right direction, but it’s worth remembering the old adage “with great freedom comes great responsibility.”

If your company would like help to better understand the new requirements around SBEEA or just to get more information, please get in touch.