A major risk associated with business activity, especially for companies with a significant volume of purchases of goods and services, is the risk of the President of the Office of Competition and Consumer Protection (UOKiK) initiating proceedings for excessive delays in payment in commercial transactions. This risk arises, on the one hand, from the possibility of the President of the UOKiK imposing a fine on the company and, on the other hand, from the obligation to provide the President of the UOKiK with a range of information on concluded commercial transactions, which requires a significant amount of work on the part of the company.
We check whether transactions between companies in the same group are also at risk from investigation in connection with the existence of payment gridlocks, potentially leading to the initiation of proceedings and the imposition of a penalty.
What is payment gridlock?
Payment gridlocks are cases in which companies fail to pay suppliers of goods or services or pay them late. However, not every case of payment gridlock can lead to the President of the UOKiK initiating proceedings. The President of the UOKiK can impose a penalty on a company if it is ‘excessively’ late in meeting its financial obligations.
An ‘excessive’ delay in the fulfilment of financial obligations occurs when a company fails to pay or pays late and the sum of such unpaid or late financial liabilities amounts to at least PLN 2 million over a period of three consecutive months.
Will the President of the UOKiK investigate non-payment or late payment in commercial transactions where the counterparty is a company in the same group?
No, as of 8 December 2022, the President of the UOKiK will not investigate commercial transactions in which companies belonging to the same group are the sole parties when determining whether a non-payment or late payment has occurred.
A group of companies consists of all companies under the direct or indirect control of a single entity. This controlling entity is also part of the group.
This means that in the course of such proceedings, the President of the UOKiK will not investigate transactions between:
- Subsidiaries belonging to the same group
- A subsidiary and a parent company belonging to the same group
It is worth noting that, from 8 December 2022, intra-group transactions are also not included in reports on the applied payment periods, which certain entrepreneurs (tax groups and taxable persons whose revenues in the tax year exceeded the equivalent of EUR 50,000,000) are required to submit annually.
What if one of the parties to the transaction is an entity from outside the group, in addition to companies from the same group? Will such a transaction also be reviewed by the President of the UOKiK?
Such a transaction may also be examined by the President of the UOKiK. Only commercial transactions where the only parties are members of the same group are exempt from review by the President of the UOKiK.
For example, if the parties to a framework agreement are several group companies and an external supplier, the purchase transactions concluded on the basis of such a framework agreement will be subject to reporting in proceedings conducted by the President of the UOKiK, and a fine may also be imposed for possible late payments in such transactions. This is because the most common ‘transaction’ effected under such a framework agreement is a specific supply contract concluded on the basis of an order placed by a particular group company. However, the counterparty to such a transaction is a third-party supplier.
Fines for failure to provide information
It should also be remembered that a company (even if it is not a party to a commercial transaction) that has been requested by the President of the UOKiK to provide information and fails to do so risks paying an administrative fine.
This fine may amount to up to 5% of the revenue generated by the enterprise in the previous tax year, but may not exceed the equivalent of EUR 50,000,000.
Want to know how to liaise with the President of the UOKiK during payment gridlock proceedings? Contact us
