Bounced Cheque Laws in UAE
Experts in UAE on legal and financial matters labeled the new decision of the UAE Cabinet in issuing fines rather than jail sentences for bounced cheques, an incredibly important step towards the right direction. The UAE government announced an amendment of its laws in order to ensure that those who are in debt, especially due to the pandemic, are able to resolve their issues.
A range of offences, including failure in paying rent and bouncing cheques no longer call for criminal cases. Rather than being put through our court system, minor offenses will be treated as misdemeanor that are subject to financial penalties. This is a huge relief for UAE residents that are living in fear for being penalized with a jail term for bouncing cheques.
This long awaited reform is set into force by year 2022. According to the decree, a bounced cheque is an executive document that is to be directly executed by a judge in court. This new decree will propose a recourse onto civil mechanisms in order to facilitate alternative methods and avoid criminal lawsuits. The amendments to the corporate transactions law of UAE encourage reconciliation of value of bounced cheques as main condition for abatement of criminal cases. However, this will still require further clarification to be provided by the local authorities.
The latest amendments are to ensure as well as several options are provided to ensure payments are collected through cheques in a fast and simple way. A method is obliging banks and other financial institutions to partially pay amount following making deductions from available funds within the issuers’ accounts.
Even though there are existing laws that give banks the authority in effecting partial payment from cheques that are based on amounts available in accounts, there are banks that don’t implement this. Amendments that were recently announced will help not only the beneficiaries but also the issuers of cheques. According to HHS Lawyers’ corporate lawyers in Dubai, changes to the corporate law allow payees and drawers additional opportunities for reconciling debts before any criminal case is initiated. Also, there is an impact on the local economy that’s positive as there will be increased confidence instilled within the local business community. This will pave the way towards cooperation and greater transparency when it comes to business transactions. Lastly, this will help during company liquidation or bankruptcy.
For now, existing laws apply for bouncing of cheques. As soon as the local court concludes elements of crime satisfy a certain case, then it’s entitled to decide on its sole discretion the sanctions that apply from options which are currently allowed by the legislation.
A cheque issuer has to be fully aware if a cheque has bounced due to a typo mistake. If there are no available funds and this is the reason for the bouncing of a cheque, it may still be remedied during any stage with a legal proceeding. A remedy can be made possible also with the decision of the court.
The same applies for the drawer filling a cheque properly but no funds are available at a specific time. As soon as a drawer is able to provide the money that has been defaulted, less legal proceedings are to be initiated against him.
In case of a settlement, a drawer is to retrieve a bounced cheque, including a clearance paper issued by debtor upon the settlement of a disputed amount. No legal proceeding will take place plus an arrest warrant and travel ban may be removed.
In the event that an issuer of a bounced cheque did everything properly; however, drained his or her account due to an emergency that took place suddenly like facing serious medical issues or lossing a job which has led to the default of a cheque presented as payment, courts can take into consideration the reason for bouncing of cheque. The courts can assess the existence of criminal intention. If cheque issuer is able to provide proof of an emergency occurring and is able to show good faith, as well as readiness in repaying debts, then a sanction will only be an administrative fine. Additionally, a grace period will be grated but there has to be proper legal representation.
In the UAE, violations to local legislations are not taken lightly. This is why if you have any doubts or concerns regarding the regulations, it is advised that you seek legal counsel. At HHS Lawyers, our lawyers and legal consultants in UAE can assess your situation and advise you on the possible steps that you can take to address your unique needs and requirements. Call us today for a quick chat with our team or to book a consultation!