From the point of view of the companies against which they are initiated, payment gridlock proceedings are one of the most burdensome proceedings in the field of competition protection. This is mainly due to the obligation to provide the President of the Office of Competition and Consumer Protection (UOKiK) with a range of information on concluded commercial transactions.
We check whether transactions between companies in the same group are taken into account when determining the existence of a payment gridlock.
What is payment gridlock?
A payment gridlock is an excessive delay by a company in meeting its financial obligations, which is dangerous both from the point of view of its liquidity and from the point of view of its business environment.
It occurs when a business partner fails to pay or pays late and the sum of these outstanding financial liabilities amounts to at least PLN 2 million over a period of three consecutive months, which quickly leads to a domino effect – those who do not receive payment for their goods or services are unable to settle their own liabilities, which may cause liquidity problems for subsequent companies in the supply chain.
A payment gridlock is not only a serious business problem, it is also a problem for a company’s image.
Will the President of the UOKiK take into account non-payment or late payment in a commercial transaction where the counterparty is a company in the same group?
No, as of 8 December 2022, the President of the UOKiK will not take into account commercial transactions in which companies belonging to the same group are the sole parties when determining the occurrence of non-payment or late payment.
A group of companies consists of all companies under the direct or indirect control of a single entity. This controlling enterprise is also included in the group.
This means that in the course of such proceedings the President of the UOKiK will not take into account transactions between:
- Subsidiaries belonging to the same group
- A subsidiary and a parent company belonging to the same group
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 trilateral cooperation agreement include a company from outside the group in addition to companies from the same group, the company from the group that is subject to payment gridlock proceedings must notify the President of the UOKiK of such a transaction.
The President of the UOKiK is entitled to examine the transaction for the occurrence of non-payment or late payment.
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.
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