New guidelines regarding setting unfair credit terms for SMEs
On 18 June 2021, the new Notification on unfair trade practices regarding the credit term for SMEs on selling products or services to a purchaser has been introduced by Thailand’s Trade Competition Commission as published on the Government Gazette. The new Notification will become effective 180 days later which is on 16 December 2021.
The main purpose of the new Notification is to prevent large purchasers which hold a large of bargaining power from taking advantage from setting unfair credit terms to SMEs, and reduce economic inequality and promote fairness in doing business for SMEs in a sustainable way.
The new Notification is summarized below:
➢ Imposing credit terms for the trade, manufacturing, and service sectors which shall not exceed 45 days, but for activities specifically related to agricultural products or primary agricultural processing with uncomplicated production processes shall not exceed 30 days unless there is a mutual agreement on setting longer credit terms or payment.
➢ Setting the standard on the credit terms period which will begin counting from the date of complete delivery of products or services. For consignment, it will begin counting from the date that the products are sold at the agreed amount.
➢ Imposing qualified SMEs to disclose their total number of employees and their annual turnover to their counterparties.
➢ Providing examples of activities that may be deemed as unfair practices which are as follows:
1. An unreasonable delay in payment of goods or services which exceeds the specified credit terms;
2. An unreasonable change of credit terms or contractual conditions without giving at least 60 days’ prior notice; and
3. Other trade conditions or credit terms that may seem unfair or may create unnecessary burdens to SMEs.
Legal Insight Vol. June 2021 of Bangkok Global Law
The PDF file can be downloaded via the link as set below.