The Late Payment of Commercial Debts (Interest) Act 1998 (Commencement No. 1) Order 1998

Explanatory Note

(This note is not part of the Order)

This Order brings into force the Late Payment of Commercial Debts (Interest) Act 1998 (“the Act”) for the purposes of the first phase, that is, in relation to commercial contracts for the supply of goods or services where the supplier is a small business and the purchaser is a large business or a United Kingdom public authority (article 3). This is the first commencement Order.

Article 2 provides for the definitions of “small business supplier”, “large business purchaser” and “United Kingdom public authority”. Schedule 1 lists categories of authority which are United Kingdom public authorities. By article 2(2), a small business is one which has 50 or fewer full-time employees. Schedule 2 provides for the calculation of the number of full-time employees in a business for the purpose of determining whether it is small or large.

An employee is defined (paragraph 2 of Schedule 2) to include persons who work in the business both under a contract of employment and other than under such a contract, eg partners and a sole owner. Provision is made for the counting of part-time employees as fractions of full-timers (paragraph 3) and employees in associated businesses are counted (paragraph 6). Taking the period of 1st April to 31st March (or a shorter period for new businesses) preceding making the contract (paragraph 4), the average is taken of the numbers of employees over that period (paragraph 5).

On the same day as this Order comes into force, the following will also come into force to give full effect to the Act–

(a) the Late Payment of Commercial Debts (Interest) (Legal Aid Exceptions) Order 1998 (S.I. No. 2482), which excepts certain contracts made by the Legal Aid Board for the provision of legal aid where the rates are those provided for under the Legal Aid Act 1988;

(b) the Late Payment of Commercial Debts (Rate of Interest) Order 1998 (S.I. No. 2480), which sets the rate of interest under section 6 of the Act;

(c) the Late Payment of Commercial Debts (Interest) Act 1998 (Transitional Provisions) Regulations 1998 (S.I. No. 2481), which provides that, while the Act is not fully in force, it shall be presumed until the contrary is proved that the business of the purchaser is a large business.