The Trade Competition Commission of Thailand (“TCC”) has issued new guidelines on credit terms in agreements between small or medium-sized enterprises (“SMEs”) and other entrepreneurs, effective 16 December 2021.
Keywords: Mazars, Thailand, Legal, SMEs, Trade Competition Commission
17 September 2021
The new guidelines will apply in cases where SMEs sell products or provide services (including consignment services) to other entrepreneurs, in order to reduce inequality and increase fairness in trade for those SMEs not in a favourable bargaining position.
The new guidelines set out what are considered fair and acceptable credit terms for payments to SMEs, based on the type of business activity, as follows:
- Trade, manufacturing, and services regarding agricultural products – the credit terms should not be more than 30 days.
- General trade, manufacturing, and services – the credit terms should not be more than 45 days.
Credit terms for agreements to which an SME is a party should follow these new guidelines. However, longer credit terms can be set if there are appropriate commercial or economic reasons for doing so.
In addition, the new guidelines list certain actions related to credit terms that may be considered unfair trade practices, as follows:
- Delaying payment until after the prescribed credit period without having reasonable grounds for doing so.
- Changing the credit terms or contractual conditions without having reasonable grounds for doing so or without giving at least 60 days’ advance notice of such.
- Any behaviours by a party to an agreement with an SME that puts the SME at a disadvantage, such as setting special conditions related to credit terms that impose an undue burden on the SME.
Reference: Royal Gazette dated 18 June 2021