The LME law (Loi de Modernisation de l’Économie) has profoundly transformed commercial relationships in France since 2008. By strictly regulating B2B payment deadlines, it aims to protect SME cash flow and reduce endemic late payments. Yet in 2025, 86% of French businesses still report experiencing late payments according to Coface, with average delays exceeding 49.7 days. Understanding the LME law, its caps, penalties and obligations for your T&Cs is essential to protect your receivables and avoid costly fines.
What is the LME law?
Definition and history
Law no. 2008-776 of 4 August 2008 on the Modernisation of the Economy, known as the LME law, is a foundational text of French commercial law. Adopted under President Nicolas Sarkozy, its main objective was to accelerate business development, particularly for SMEs, by reducing payment deadlines that represented a major brake on their growth.
Before the LME law, payment deadlines could reach 90 days or even longer in certain sectors. Large companies imposed their conditions on their suppliers, creating structural cash flow imbalances. The LME law put an end to these practices by establishing a binding legal cap.
Since its adoption, the text has been amended and strengthened on several occasions:
- The Macron Law of 2015 tightened administrative sanctions and gave the DGCCRF greater powers to monitor and sanction businesses.
- The PACTE Law of 2019 strengthened transparency obligations and introduced additional measures to protect suppliers of businesses in difficulty.
Economic modernisation objective
The central objective of the LME law is simple: to accelerate cash flow circulation in the French economy. Every day of late payment represents free credit granted by the supplier to their client. In 2024, the Banque de France estimated that French SMEs would have benefited from an additional €15 billion in cash flow if statutory deadlines were respected.
The LME law is codified in Articles L441-10 et seq. of the Commercial Code. It applies to all commercial transactions between professionals, regardless of the size of the businesses involved.
Payment deadlines imposed by the LME law
The default 30-day legal deadline
In the absence of specific contractual provisions, the legal payment deadline is set at 30 days from the date of receipt of the goods or performance of the service (Article L441-10, I of the Commercial Code). This deadline runs from the invoice issue date if that date falls after receipt.
This 30-day deadline is the standard regime. It applies automatically in the absence of any contractual clause. For normal commercial relationships, without specific negotiation, this deadline prevails.
The 60-day cap with contractual agreement
The parties may agree on a longer deadline, up to a maximum of 60 calendar days from the invoice issue date. An equivalent alternative is available: 45 days end of month from the issue date. Both deadlines are equivalent in practice; the choice depends on the business’s habits.
To be valid, this agreement must:
- Be explicitly included in the general terms and conditions of sale (T&Cs) or in the commercial contract
- Not be abusive towards the creditor (assessed on a case-by-case basis)
- Be accepted by both parties
Any deadline exceeding 60 days is deemed unwritten and automatically reduced to the legal cap.
Sectoral exceptions
The LME law provides exemptions for certain specific sectors, codified in Article L441-11 of the Commercial Code:
- Agri-food and alcoholic beverages: deadlines may be arranged by homologated professional agreement, with specific rules depending on the products (fresh, frozen, etc.)
- Road transport: deadlines are governed by specific sectoral texts
- Perishable and semi-perishable products: deadlines reduced to a maximum of 30 days with no possibility of exemption
In the construction sector, although no formal sectoral exception exists, private contracts are generally subject to the 60-day cap, while public contracts follow their own rules (30-day deadline for the State and local authorities).
Instalments and periodic invoices
For periodic invoices within the meaning of Article 289 of the General Tax Code (summary invoices covering a period), the maximum deadline is 45 days from the issue date. This rule aims to prevent periodic invoicing from being used to artificially extend deadlines.
For instalments, they do not technically constitute invoice payment: their regime is free, unless a contractual clause specifies otherwise. In practice, it is recommended to set out instalment conditions in the T&Cs.
Penalties for non-compliance
Automatic late payment penalties
Any invoice settled after the agreed (or legal) deadline incurs late payment penalties due automatically, with no prior formal demand (Article L441-10, II of the Commercial Code). The creditor does not need to inform their debtor: penalties apply automatically from the first day of delay.
The applicable rate is the higher of:
- ECB rate plus 10 points: for H1 2026, the ECB refinancing rate is 2.15%, giving a penalty rate of 12.15%
- 3 times the legal interest rate: for 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), which is higher than the floor of 3 times the legal rate.
To calculate penalties: Total amount (incl. VAT) × Rate × (Number of days overdue / 365)
Example: An invoice of €10,000 (incl. VAT) paid 45 days late generates: 10,000 × 12.15% × (45/365) = €149.79 in penalties.
The €40 flat-rate compensation
In addition to late payment penalties, any late payment entitles the creditor to a flat-rate compensation of €40 for collection costs, automatically payable (Article D441-5 of the Commercial Code). This compensation is due even if no collection costs have actually been incurred.
If actual collection costs exceed €40, the creditor may claim additional compensation, subject to supporting documentation. However, this compensation is not due if the debtor is subject to insolvency proceedings (safeguard, reorganisation, liquidation).
DGCCRF administrative fines
The Directorate General for Competition Policy, Consumer Affairs and Fraud Control (DGCCRF) is responsible for monitoring compliance with the LME law. Its agents may conduct investigations and impose administrative sanctions:
- Individual: up to €75,000 in fines
- Legal entity: up to €2 million in fines
- Repeat offence: doubling of amounts within 2 years of a first definitive sanction
Sanctions are systematically published on the DGCCRF website (the “name and shame” practice), which can have significant reputational consequences. Each year, the DGCCRF publishes its enforcement report: in 2024, several large companies were sanctioned for exceeding the legal caps.
How to comply with the LME law in your T&Cs
Mandatory mentions in T&Cs and invoices
Any business subject to the obligation to issue T&Cs must include in them the payment conditions, in particular:
- Payment deadlines: specify whether the deadline is 30 days (default) or up to 60 calendar days/45 days end of month (if agreed)
- Late payment penalty rate: mention the applicable rate (at minimum: ECB rate + 10 points or 3 times the legal rate)
- The €40 flat-rate compensation: mandatory mention in T&Cs and on the invoice
These mentions must also appear on each invoice issued, in accordance with Article L441-9 of the Commercial Code. The absence of these mentions is itself an offence liable to sanctions.
Standard penalty clause
Here is the recommended wording for your T&Cs and invoices:
“In the event of late payment, late payment penalties are due automatically, with no prior formal demand, at the rate of [ECB rate in force on 1 January or 1 July + 10 points]% per annum. In accordance with Article D441-5 of the Commercial Code, a flat-rate compensation of €40 for collection costs is also due.”
It is advisable to update the rate each half-year in your T&C templates, or to draft the clause with a direct reference to the applicable legal rate, which avoids any manual update.
The due date
The due date is the starting point for calculating penalties. It corresponds to the due date shown on the invoice. In the absence of a due date, the deadline runs from the date of receipt of the invoice (or the date of delivery of goods/performance of the service, if later).
To avoid any dispute, it is essential to clearly state the due date on each invoice.
Automating LME law compliance with Billabex
Complying with the LME law on a daily basis means tracking dozens or hundreds of invoices, calculating penalties from the first day of delay, and automatically chasing debtors. These tasks, time-consuming and prone to manual errors, can be entirely automated.
Billabex is the AI-powered collection solution designed for B2B businesses. It enables you to:
- Automatically detect each late payment from the first day
- Calculate and apply late payment penalties and the €40 flat-rate compensation on each overdue invoice
- Intelligently follow up with your clients using messages tailored to the context and commercial relationship
- Centralise the monitoring of all your receivables in real time
- Automatically comply with LME rules without manual intervention
With Billabex, your compliance with the LME law is guaranteed and your cash flow protected. Discover Billabex →
For further reading: our guide on late payment penalties details the calculation and applicable rates, our article on the invoice statute of limitations clarifies until when you can claim them, and our complete guide on DSO shows how to measure the impact of late payments on your cash flow.
