Chile Update – Amendments to 30 Day Payment Law
Earlier in the year, we posted about Law
This is a particularly important law that will have positive benefits on small to medium size businesses who are collectively one of the largest sources of employment in the country. These same companies face a constant threat to their finances since they often have to accept payment terms that are unfavorable. Debtors, and especially large businesses, often insist on long payment terms which are often detrimental to the liquidity of SME´s and thereby the entire economy.
Given the recent events in Chile, which has affected SME´s more than others, the current government has accelerated the implementation by making changes to the original bill:
This bill of law it’s very specific, it contains only two articles:
- The first article overrules the initial 60-day payment terms for the transition phase that would have been in place for the first 24 months ending in January 2021.
- The second article modifies the initial transition phase to only three months from the date the law is published that approves the amendment. Therefore, the transition phase which would have seen 60-day limits initially will be considerably reduced, applying only during the three months following the publication. Once said term expires, the 30-days legal payment term will apply.
This bill of law for the amendment of Law No. 21,131, is being treated as an urgent matter, and therefore it will be discussed in Congress soon.
Harris Gomez Group works with service and technology providers who service the industrial sectors. In Chile, this tends to be the large mining companies. We often see companies who face cash flow pressures because large mining companies have payment terms of at least 60 days and up to 90 days in some cases. This leads to many companies using factoring companies to finance their invoices but this comes at a cost to companies who are already facing financial pressures. We believe the new law is a step in the right direction.
Harris Gomez Group is a Common Law firm, with offices in Santiago, Bogotá, and Sydney. We also have legal teams in Peru, Bolivia, Ecuador, Brazil, and Argentina. Over the last 18 years, we have been supporting foreign companies with their growth in Latin America. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets.
To better understand how we can support your management team in the Region, please contact Cody Mcfarlane at email@example.com