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Regulations of Fair Payment Terms to protect micro and small enterprises in Ecuador

The General Regulations of the Organic Law of Fair Payment Terms entered into force on April 23, 2024. This law and its regulations aim to protect micro and small enterprises, as well as organizations involved in family agriculture and the solidarity economy. They establish fair payment terms when large companies and public entities contract with these entities.


Key aspects:

Payment Terms

The law establishes the following payment terms

  • Within 45 days of the first year.

  • Within 30 days of the second year.


The terms are counted from both:

  • The date of receipt of the goods,

  • The completion of the service, or

  • The issuance of the applicable invoice, whichever occurs first.


In the case of contracts with the public sector, the time frame established by the Organic Law of the National Public Procurement System will be used to determine the beginning of the period.


Regulations

  • In private sector contracts, contractual and negotiating instruments may be signed to ensure the fulfillment of the obligation to pay within fair terms.

  • In public sector contracts, the provisions of the Organic Law of the National Public Procurement System will be strictly applied to determine the start of the fair payment period established in the Organic Law of Fair Payment Terms, giving priority to micro and small enterprises.


Claims and collection procedures

The law grants creditors the right to claim compensation for collection costs and expenses in the event of late payment.


The regulations provide the following:

  • Private sector: Beneficiaries may opt for judicial action or alternative dispute resolution.

  • Public sector: Administrative and judicial remedies are available.

  • National Public Procurement System contracts: Complaints of unjustified withholding of payments are handled by the National Public Procurement Service. If unjustified withholding is not proven, the officials involved will be sanctioned in accordance with established disciplinary and appeals procedures.


Business distinction

The law establishes a non-monetary award to recognize companies that meet payment terms of up to 30 days to micro and small business suppliers. The regulations establish the procedures for obtaining this award, including requirements and credit benefits through public and private financial institutions.


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Legal disclaimer

The content of this blog is provided for informational and educational purposes only and should not be considered legal advice. Regulations in Ecuador are subject to changes and updates that may affect the applicability and accuracy of the content published here. We do not guarantee that the information presented is accurate, complete or current at the time of reading. Therefore, past postings should not be construed as necessarily reflecting current regulations. We strongly recommend that you consult with our qualified attorneys for specific and personalized advice.

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