SBEEA: Naming and shaming for late payments Part 2

In my previous post on late payment practices and access to finance, I outlined how section 3 of the Small Business Enterprise and Employment Act 2015 (SBEEA) has placed a duty on large companies and LLPs to report on their payment practices.

The intent of this legislation is to give a helping hand to suppliers (who are often small businesses) to successfully retrieve payment from large companies and LLPs.

Recently there have been further developments around this legislation and one of these is the proposal from the department for Business, Energy and Industrial strategy (BEIS) to implement a complaints scheme. It is proposed that the scheme will enable small businesses to make complaints where there are payment issues. The definition of “payment” not only covers failure to make payments but also price quibbling and attempts to stop small businesses from making complaints.

The scheme will handle complaints in-house and will be enforced by the Small Business Commissioner. BEIS have announced that the appointment of the Commissioner will be in autumn 2017.

The Commissioner’s main role will be to provide general advice to small businesses (for example, dispute resolution) and point them in the right direction if they need an ombudsmen or regulator. When a small business makes a complaint, the Commissioner will ask for representations from the large business or LLP. The Commissioner will then have to decide whether to make recommendations to the parties.

However, there are limits to the scheme and these are where there are:

  • Disputes about pricing of good and services
  • Ongoing legal proceedings
  • Issues that should be passed to the appropriate ombudsmen or regulator
  • Matters that started before the implementation of the scheme

Section 3 of SBEEA is still scheduled to come into effect in April 2017 and we have more information following the recent report from BEIS.

The payment practice reporting will:

  • Apply to large companies and LLP’s only (the criteria have not changed and are mentioned here)
  • Be published on a government website
  • Be published twice a year rather than the quarterly as was originally proposed

Previously, I questioned whether the naming and shaming approach would break the culture of late payment to suppliers. On reflection, with the appointment of the Commissioner on the horizon I do think more weight has been given to the how seriously the government views late payment to small businesses.

Mike Cherry, National Chairman of the Federation of Small Businesses, said:

“Tackling late payments is now a key part of the government’s corporate governance agenda. The comprehensive and regular duty to report is the first step to combat a business culture that feels like one where it is OK to pay small firms late. It is not OK - we estimate that 50,000 business deaths could be avoided every year, if only payments were made promptly – adding £2.5 billion to the UK economy. We need to see executive board level engagement and scrutiny of payment practices to deliver lasting cultural change”.

However, I still stand by my question as any decision of the Commissioner is not legally binding. Also, the Commissioner is not obliged to publish a report and has discretion as to whether to include the name of the respondent. At Jordans Corporate Law we will be keeping our eyes on the implications of this legislation when it comes into force. Stay tuned.


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