Investment and commercial law Beware of Statute of Limitations – Invoices from 2022 May Expire by the End of December 2024
Entrepreneurs' Arrears According to KRD
According to data from the National Debt Register (KRD) Economic Information Office, Polish entrepreneurs owe their business partners over 9 billion PLN (Study "Overdue Invoices in Polish Enterprises" pol. „Przeterminowanie faktur w polskich przedsiębiorstwach” conducted by TGM Research in the first quarter of 2023). Thousands of companies struggle with unpaid claims, negatively affecting financial liquidity and business growth. Ignoring these arrears can eventually lead to the claims becoming time-barred. Often, we wait too long to act against unreliable contractors, hoping for their goodwill. However, time works against us.
What Does the Statute of Limitations for Invoices Mean?
The statute of limitations means that if you fail to ensure your contractor pays you, your chances of recovering the claim diminish to nearly zero after a certain period. Once the limitation period expires, the debt still exists, but the debtor can effectively avoid payment by invoking the statute of limitations.
When Do Invoices Become Time-Barred?
As a general rule, claims arising from business activities expire after 3 years.
However, the law may stipulate shorter periods, e.g., claims arising from sales made as part of the seller’s business activity (e.g., between entrepreneurs) expire after 2 years.
The general rule states that if the limitation period is at least 2 years, the limitation occurs at the end of the calendar year.
This means that many invoices from 2022 will expire on December 31, 2024.
Example:
The company “ABC Sp. z o.o.” delivered goods to the company “DEF S.A.” in March 2022, with payment due in April 2022. “DEF S.A.” did not pay on time, and “ABC Sp. z o.o.” took no action, hoping that the contractor would soon pay. If no appropriate steps are taken by December 31, 2024, the claim will expire, and the company “ABC Sp. z o.o.” will effectively lose the ability to enforce its claims.
What Interrupts the Limitation Period?
Interrupting the limitation period resets it, starting a new countdown. Actions that interrupt the limitation period include:
- filing a lawsuit in court;
- acknowledgment of the debt by the debtor – e.g., by signing a court or out-of-court settlement in which the debtor acknowledges the debt;
- initiating enforcement proceedings;
- registering the claim in bankruptcy proceedings.
Note: Until June 2022, filing a motion for an attempt at amicable resolution before the court (also initiating mediation) interrupted the limitation period. Now, such a motion only suspends the limitation period for the duration of the proceeding. This means the period is paused during the conciliatory process, which, in practice, takes a few months. This time is not included in the limitation period.
What Does Not Interrupt the Limitation Period?
- Payment reminders – sending reminders, emails, or phone calls has no impact on the limitation period of your claims;
- Negotiations with the debtor – discussions about debt repayment do not stop the limitation period.
Limitation of Interest – Don’t Forget It
Interest on unpaid invoices generally expires along with the invoice amount. However, if the debtor has settled the principal amount and only interest remains, it expires after three years as a periodic claim.
The Debtor Can Waive the Statute of Limitations Defense, but…
As previously mentioned, the statute of limitations for a claim means that after a certain period, the creditor loses the ability to effectively pursue the claim through legal means if the debtor raises the defense of the statute of limitations.
However, the obligation still exists. The debtor can waive the statute of limitations defense and voluntarily settle the time-barred debt at any time.
Such situations are extremely rare and should not be relied upon when planning debt recovery. Debtors are often waiting for these deadlines to pass. Therefore, it is important to act before the limitation period expires.
Note: Waiving the statute of limitations defense can only occur after the limitation period has expired, meaning when the debtor could have raised such a defense. A prior waiver of the statute of limitations defense will be ineffective. Thus, including a clause in the agreement stating that the debtor waives the statute of limitations defense is meaningless.
Patience Doesn’t Pay Off – Act Now
Waiting too long to take action against unreliable contractors may result in losing the ability to pursue your claims.
The statute of limitations for claims means that although the debt still exists, you will not be able to effectively enforce your money. Debtors do not remain idle while waiting for their debts to expire – in the meantime, they dispose of assets, set up new companies, or declare bankruptcy. Therefore, don’t wait – check today if you have unpaid invoices from 2022 and act.
Summary: What Steps Should You Take to Recover Your Money?
- Prepare a list of outstanding payments – analyze your accounting documents and identify unpaid invoices from 2022;
- Remind the debtor of the overdue payment – you might recover the claim without starting a legal process;
- Consider filing a lawsuit before the end of 2024 – remember that filing a lawsuit interrupts the limitation period;
- Consider seeking legal assistance – if you don’t feel confident handling the issue yourself or the matter is complex, a lawyer can help resolve doubts and choose the most effective course of action.
