Prescription of commercial debts: deadlines and rules

Prescription of commercial debts: what every manager must know

Prescription of commercial debts: what every manager must know

Extinctive prescription constitutes one of the most feared legal mechanisms in terms of recovery. When a commercial debt is not claimed within the legal deadline, the debtor can oppose the limitation period and definitively release himself from his payment obligation. Understanding the limitation rules is therefore essential to preserve the rights of your company and secure its cash flow.

The limitation period under common law: 5 yearsSince the reform carried out by law n°2008-561 of June 17, 2008, article L110-4 of the Commercial Code sets at5 years

the limitation period for obligations arising from trade between traders or between traders and non-traders. This period aligns the commercial limitation period with the common law period provided for in article 2224 of the Civil Code.

This five-year period applies to the majority of commercial debts: unpaid invoices between professionals, services, supply contracts, commercial commissions. The starting point runs from the day on which the holder of the right knew or should have known the facts allowing him to exercise it, which generally corresponds to the due date of the invoice.

Deadlines specific to certain debts

• Numerous exceptions coexist with the common law deadline:2 years
• for debts owed by professionals to consumers (article L218-2 of the Consumer Code)1 year
• 1 yearfor payment actions against carriers of goods (article L133-6 Commercial Code)
• 10 yearsfor debts established by an enforceable title (article L111-4 of the Code of Civil Enforcement Procedures)
• 5 yearsfor commercial rents (article 2224 Civil Code)

3 years

for drafts and bills of exchange (article L511-78 Commercial Code)

The exact characterization of the debt therefore determines the applicable period. An error in analysis can lead to the irremediable loss of the right to take legal action.Interruption and suspension of prescriptionThe prescription period is not fixed. Several events allow the

• to be interrupted ⬥⬥⬥, erasing the time limit already running and causing a new time limit to run:AA
• summons to court ⬥⬥⬥, even in summary proceedings (article 2241 Civil Code)Aact of forced execution
• like a seizureTheacknowledgment of debt
• by the debtor (article 2240), in writing or partial payment

A precautionary measure taken in application of the Code of Civil Execution ProceduresNote: the simple letter of formal notice, even recommended, does not interrupt the prescription. On the other hand, the limitation period may besuspended

in the event of impossibility to act resulting from the law, an agreement or force majeure (article 2234 Civil Code), as well as during a mediation or conciliation procedure (article 2238).

in the event of impossibility to act resulting from the law, an agreement or force majeure (article 2234 Civil Code), as well as during a mediation or conciliation procedure (article 2238).

1. Practical strategies to preserve your receivablesTo avoid statute of limitations, adopt proactive management of accounts receivable:
2. Implement rigorous monitoringof due dates with automatic alerts in your accounting software
3. Act from the first unpaid debts ⬥⬥⬥: reminders within 15 days, formal notice within 30 daysFavor interruptive acts ⬥⬥⬥: order to pay, subpoena, rather than simple reminders
4. Obtain acknowledgment of debtfrom the debtor by negotiating a written schedule
5. Document all proceduresto prove the interruption in the event of litigation

Prescription is of public order: the judge cannot raise it ex officio (article 2247 Civil Code), but the debtor will systematically invoke it. Anticipating remains the best defense.