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Getting to Grips with the UAE’s New Federal Decree on Bounced Cheques

Getting to Grips with the UAE’s New Federal Decree on Bounced Cheques

The dishonouring of cheques has been a thoroughly contested and debated topic in the UAE’s legal landscape, primarily for the implications it currently carries. Presently, cheques and their dishonouring are looked at through the lenses of UAE Federal Law No. 18 of 1993. 

What do the new changes entail?

The new changes primarily clarify the types of criminal offences that could arise from a bounced cheque while setting the scope of its criminal nature. Further, under the new amendments, a dishonoured cheque would be recognized as an ‘executive document’ that can be relied upon for the execution process’ in court. 

Types of criminal offences arising from dishonoured cheques 

  1. Fraudulent use of cheques by ordering the Bank not to pay the cheque amount; and
  2. Withdrawing the account balance prior to the date of the cheque to prevent encashment.
  3. Forgery of cheques.
  4. Cheque falsification.

Moreover, once the execution process is in motion, the civil courts would also attach the assets owned by the individual that issued the subject cheque while possibly serving orders for jailtime. Additionally, under the new regime, civil courts would be steadfast in limiting the capability of those convicted to conduct or pursue commercial activities. 

On the contrary, the new amendments could also positively impact the collection of payments through cheques, wherein banks would be in a position to ‘partly’ fulfil a cheque claim in the event of there not being sufficient funds to service the full amount. This would, in turn, ease the stress placed on organizations that are direly affected by negative cashflows within the market. 

Conclusively, it is evident that these changes are brought about to rationalize the existing laws surrounding the dishonouring of cheques while continuing to penalize the convicted individual.