21 April, 2017
The Reporting on Payment Practices and Performance Regulations 2017 have very recently come into force. These regulations impose new duties for qualifying large companies and LLPs to comply with. Such qualifying companies must now publish a report detailing their payment practices in relation to "relevant" contracts. This information includes the company's standard payment terms and periods, and any details of where these may vary. In addition, the report calls for details of payment performance - specifically the amount of days before payment is made, and details of how many payments are made over a period and when.
Qualifying companies and LLPs are those that meet two of the following requirements: an annual turnover of £36 million, a balance sheet total of £18 million and over 250 employees. The duty to report applies to financial years beginning after 6 April 2017, but does not apply until a company is in its second financial year. "Relevant" contracts are those that concern goods, services, or intangible assets (e.g. intellectual property), are of significant relation to the UK or UK law, but not in relation to financial services.
These reports are expected for each filing period, with most companies generally having two or thereabouts per financial year. It is worth noting that the report will also provide the name of the director - or designated member of an LLP - who affirms the information contained within is correct. Failure to comply with the new regulations could result in criminal sanctions for companies and directors alike
Where a report is not published, or is false or misleading in its content, the company and all persons who were directors before the end of the filling period are considered to have committed an offence. The penalties begin with a fine, but may extend to prosecution or conviction. It should be clear that qualifying companies and LLPs must take these new regulations seriously, and become as well informed as possible.
If your company or LLP are due to become subject to these requirements, now is the time to review your payment and contract practices, as well as the contracts that the new regulations cover. For advice and assistance in preparing your business for these changes contact John Pickervance, Associate Solicitor within the Corporate and Restructuring department by email John Pickervance or phone 0800 321 3258. Alternatively, send any question through to Forbes Solicitors via our online Contact Form.