As of January 1, 2021, Law 2024 of 2020, known as the “Fair Payment Terms Law,” enters into force, with the purpose of promoting and supporting micro, small, and medium-sized enterprises or entrepreneurs (hereinafter, “MSMEs”), enabling them to receive payment for their fulfilled commercial obligations within certain terms.
First of all, it is necessary to mention that the Fair Payment Terms Law is not enforceable by large companies or by MSMEs in connection with the execution of non-commercial acts. Thus, according to Article 23 of the Commercial Code, non-commercial acts include the purchase of goods for domestic consumption and/or artistic works; the provision of professional services; and the sale of artistic works and/or products from the agricultural or livestock sector, provided that no enterprise or company is constituted.
On the other hand, by virtue of Decree 957 of 2019, the subjects authorized to invoke Law 2024 of 2020 are the following:
| ANNUAL INCOME BY SECTOR | |||
|---|---|---|---|
| SUBJECTS | MANUFACTURING | SERVICES | COMMERCIAL |
| Microenterprises or microentrepreneurs | Less than or equal to $855,525,404 (23,563 UVT) | Less than or equal to $1,197,728,304 (32,988 UVT) | Less than or equal to $1,625,472,852 (44,769 UVT) |
| Small enterprises or entrepreneurs | Greater than $855,525,404 (23,563 UVT) and less than $7,441,506,140 (204,955 UVT) | Greater than $1,197,728,304 (32,988 UVT) and less than $4,790,876,908 (131,951 UVT) | Greater than $1,625,472,852 (44,769 UVT) and less than $15,655,864,368 (431,196 UVT) |
| Medium-sized enterprises or entrepreneurs | Greater than $7,441,506,140 (204,955 UVT) and less than $63,051,202,020 (1,736,565 UVT) | Greater than $4,790,876,908 (131,951 UVT) and less than $17,537,998,472 (483,034 UVT) | Greater than $15,655,864,368 (431,196 UVT) and less than $78,450,405,136 (2,160,692 UVT) |
That said, the maximum terms for MSMEs to receive their outstanding payments were set according to two dates: from January 2021 to December 2021, 60 calendar days; and, from January 2022, 45 calendar days. However, the 60-calendar-day term must be applied by MSMEs in commercial operations carried out under contracts entered into with state entities (as of January 1, 2021) and the General System of Social Security in Health (as of January 2023).
The terms mentioned in Law 2024 of 2019 shall run from the day following the date of delivery of the product or provision of the service by the MSMEs. Therefore, for example, a microenterprise that sells its construction materials to a company on February 1, 2021, must receive its payment no later than April 2, 2021.
It should be added that non-compliance with the Fair Payment Terms Law by stipulating terms longer than those indicated in commercial operations will result in the automatic adjustment of the buyers' payment conditions. Furthermore, in the event of non-compliance by the latter, MSMEs may demand payment for the product sold or service rendered through collection accounts and/or invoices.
In short, based on the foregoing, there is no doubt that Law 2024 of 2019 represents a solution for MSMEs to remain in the Colombian market, taking into account the consequences and economic risks that threaten them due to the pandemic declared by the Covid-19 virus, as it allows them to continue operating while, in turn, requiring their buyers to pay their obligations.
Now, the great challenge posed by the Fair Payment Terms Law is, in addition to its dissemination, the promotion of the law, that is, the correct stipulation of the terms and their compliance, with the purpose of not resorting to judicial and/or administrative actions to seek payment from their debtors.
Author: Paola Palomino – Consulting Attorney at AZC