SPECIAL BULLETIN – “SANCTIONED THE LAW TO PAY IN FAIR INSTALMENTS – LAW 2024 OF 2020”

On July 23, 2020, the president of Colombia, sanctioned Law 2024 of 2020 (the “Law“) which allegedly aims to protect natural and legal persons, through the adoption of mechanisms that protect these persons from being subject to burdensome contractual conditions in relation to the procedures, payment terms and invoicing of their commercial operations.

Obligation to pay in fair instalments:

The Law establishes the obligation for all merchants and non-merchants who carry out commercial acts, to pay their contractual obligations within a maximum of 60 calendar days, within the first year as of the date of the  entry into force of the Law’s, and a maximum of 45 non-renewable calendar days, for the second year of the as of the date of  entry into force  of the Law.

In the particular case of contracts governed by Law 80 of 1993, which are concluded by state entities with a micro, small or medium-sized enterprise, payments must be carried out within a maximum of 60 calendar days following acceptance of the invoice.

What business operations does it apply to?

The Law applies to all payments caused as retribution for business agreements, whether they are made by merchants, non-merchants, suppliers, contractors or subcontractors.

And does not apply to: (i) payments carried out in connection with commercial transactions involving consumers; (ii) interest payments on checks, bills of exchange, payments of damages, payments by insurance companies, loan agreements and any other contract where the deferred terms are inherent to its substance; and (iii) payment of debts subject to bankruptcy or business restructuring proceedings.

Finally, it should be noted that this obligation to pay with in a fair term is not applicable to business transactions between companies that are considered to be large companies.

Compensation for collection costs:

Article 5 of the Law entitles the creditor to demand from the debtor that fails to pay within the due time, the indemnification of all collection costs incurred by the creditor due to the debtor’s default. The above, unless the debtor evidences that his default occurred due to a fortuitous event or force majeure.

Penalty for non-compliance with the law:

The Law provides that any clause or stipulation that contravenes these rules shall be ineffective in its entirety and have no legal effect, since these rules are of a mandatory nature. Similarly, any action to circumvent its application may be subject to legal actions or administrative sanctions.

 

We are looking forward to any assistance you may require in connection with the above. For this purpose, you may contact Jaime Moya (jmoya@godoyhoyos.com) or  Natalia Fernández (nfernandez@godoyhoyos.com).

The above information is offered as an information service to our clients and does not constitute legal advice.