The French LME law (Loi de Modernisation de l’Économie) has fundamentally shaped business-to-business payment practices in France since 2008. By setting strict caps on payment terms, it aims to protect SME cash flow and reduce endemic late payments. Yet in 2025, 86% of French companies still report experiencing payment delays according to Coface, with average payment terms reaching 49.7 days. Understanding the LME law, its limits, penalties and CGV (general terms of sale) obligations is essential for protecting your receivables and avoiding costly fines.
What Is the French LME Law?
Definition and Background
Law n°2008-776 of August 4, 2008, known as the LME (Loi de Modernisation de l’Économie), is a cornerstone of French commercial law. Its primary objective was to accelerate business development — especially for SMEs — by reducing payment delays that were a structural drag on growth.
Before the LME, payment terms could stretch to 90 days or more in some sectors. Large companies routinely imposed their terms on suppliers, creating systematic cash flow imbalances. The LME put an end to these practices by establishing binding legal caps.
The law has been strengthened over time:
- The Macron Law of 2015 toughened administrative penalties and expanded DGCCRF enforcement powers.
- The PACTE Law of 2019 increased transparency obligations and added further protections for suppliers of companies in financial difficulty.
Economic Objective
The LME’s central goal is straightforward: accelerate cash circulation in the French economy. Every day of late payment represents an interest-free loan from supplier to customer. In 2024, the Banque de France estimated that SMEs would have had an additional €15 billion in working capital if legal deadlines were respected.
The LME is codified in articles L441-10 and following of the French Commercial Code (Code de commerce). It applies to all commercial transactions between professionals, regardless of company size.
Payment Deadlines Under the LME Law
The Default 30-Day Legal Deadline
In the absence of specific contractual provisions, the legal payment deadline is 30 days from receipt of goods or completion of services (article L441-10, I of the Commercial Code). This deadline applies automatically where no contractual term has been agreed.
The 60-Day Cap by Contractual Agreement
Parties may agree on a longer deadline, capped at 60 calendar days from the invoice issue date. An equivalent alternative is 45 days end of month from the invoice date. For this extended term to be valid, it must:
- Be expressly stated in the general terms of sale (CGV) or commercial contract
- Not be abusive toward the creditor
- Be accepted by both parties
Any deadline exceeding 60 days is deemed unwritten and automatically reduced to the legal cap.
Sectoral Exceptions
The LME provides derogations for specific sectors under article L441-11 of the Commercial Code:
- Food and beverage industry: payment terms may be adjusted by approved professional agreements, with specific rules depending on product type (fresh, frozen, etc.)
- Road transport: governed by sector-specific regulations
- Perishable goods: maximum 30-day deadline with no derogation possible
In construction (BTP), private contracts generally follow the 60-day cap, while public contracts are subject to specific public procurement rules (30-day deadline for the State and local authorities).
Periodic Invoices
For periodic invoices within the meaning of article 289 of the French General Tax Code, the maximum deadline is 45 days from the invoice issue date. This prevents periodic invoicing from being used to artificially extend payment terms.
Penalties for Non-Compliance
Automatic Late Payment Penalties
Any invoice paid after the agreed (or legal) deadline generates late payment penalties automatically and without prior notice (article L441-10, II of the Commercial Code). The creditor does not need to formally notify the debtor: penalties apply from the first day of delay.
The applicable rate is the higher of:
- ECB rate plus 10 percentage points: in H1 2026, the ECB refinancing rate is 2.15%, giving a penalty rate of 12.15%
- 3 times the legal interest rate: in H1 2026, the professional legal rate is 2.62%, giving a floor of 7.86%
The applicable rate for H1 2026 is therefore 12.15% (ECB + 10 points).
Calculation formula: Invoice amount (VAT included) × Rate × (Days late / 365)
Example: A €10,000 invoice paid 45 days late generates: 10,000 × 12.15% × (45/365) = €149.79 in penalties.
The €40 Flat-Rate Indemnity
In addition to late payment penalties, any payment delay automatically triggers a flat-rate indemnity of €40 for collection costs (article D441-5 of the Commercial Code). This indemnity is owed even if no actual collection costs were incurred.
If actual collection costs exceed €40, the creditor may claim additional compensation with supporting documentation. However, this indemnity is not owed if the debtor is in insolvency proceedings (sauvegarde, redressement judiciaire, liquidation judiciaire).
For full details, see our dedicated articles on late payment penalties in France and flat-rate compensation for collection costs.
DGCCRF Administrative Fines
The DGCCRF (Direction générale de la concurrence, de la consommation et de la répression des fraudes) is responsible for enforcing LME compliance. Its agents can conduct investigations and impose administrative sanctions:
- Individual (natural person): up to €75,000
- Legal entity (company): up to €2 million
- Repeat offence: amounts doubled within 2 years of a first definitive sanction
Sanctions are systematically published on the DGCCRF website (a “name and shame” policy), which can have significant reputational consequences.
LME Compliance in Your General Terms of Sale (CGV)
Mandatory Mentions in CGV and Invoices
Every company required to have general terms of sale must include payment conditions, specifically:
- Payment deadlines: state whether the 30-day default applies or whether an extended term (up to 60 calendar days or 45 days end of month) has been agreed
- Late payment penalty rate: reference the applicable rate (minimum: ECB rate + 10 points or 3 times the legal rate)
- The €40 flat-rate indemnity: mandatory mention in CGV and on each invoice
These mentions must also appear on every invoice issued, per article L441-9 of the Commercial Code. Failing to include them is itself an offence subject to sanctions.
Recommended Penalty Clause Wording
The following formulation is standard in French B2B contracts:
“In the event of late payment, late payment penalties are automatically owed without prior notice, at a rate of [ECB rate in force on January 1 or July 1 + 10 points]% per annum. Pursuant to article D441-5 of the Commercial Code, a flat-rate indemnity of €40 for collection costs is also owed.”
It is advisable to reference the legal rate dynamically in your templates to avoid manual updates each semester.
Automating LME Compliance with Billabex
Complying with the LME law on a daily basis means tracking dozens or hundreds of invoices, calculating penalties from day one of delay, and systematically chasing late payers. These time-consuming and error-prone tasks can be fully automated.
Billabex is an AI-powered collections solution designed for French B2B companies. It enables you to:
- Automatically detect each late payment from the first day
- Calculate and apply late payment penalties and the €40 flat-rate indemnity on every overdue invoice
- Intelligently chase clients with messages adapted to context and commercial relationship
- Centralize the monitoring of all your receivables in real time
- Automatically comply with LME rules without manual intervention
With Billabex, your LME compliance is guaranteed and your cash flow protected. Discover Billabex →
For more, see our guide on legal payment terms for invoices in France.
