Cheques are commonly used in UAE for personal and business transactions. As a matter of fact, they're the most preferred form of rental payments in Dubai. While their acceptability has never been an issue in the country, they have the risk of bouncing. With bounced cheques in UAE, they result to legal or civil proceedings against cheque issuers.
4 factors of cheques bouncing in UAE:
- Non-availability of sufficient funds or funds that are equal or more than amount in a cheque during the issuance date
- Closure of bank account prior to cheque being encashed
- Technical errors such as wrong date, mismatched signatures, scribbled text and overwritten
- Instruction to the banking facility in withholding payment against an issued cheque
New Update on UAE Legislation Related to Bounced Cheques
Federal Law (no 18) of 1993, Commercial Transactions Law, has been amended just recently by the UAE Cabinet. Banks are now obliged in making partial payments to beneficiaries of cheques when cheques that are presented as payment as long as the account balance can party satisfy claims of beneficiaries.
Essentially, banks will make a partial payment onto a beneficiary of a cheque with the remaining balance permissible to take to court. The beneficiary can take the bounced cheque to court to realize remaining amount left unpaid by the issuer of the cheque. This change in the law can help in reducing the time for beneficiaries in claiming their rights as bounced cheques are now viewed as executive documents which are enforceable and directly executed by a UAE judge.
UAE Civil Court will demand a bounced cheque's issuer in paying the sum that's equal to the cheque's value or the outstanding balance. Should the cheque issuer fail in paying, assets can be subjected for enforcement in order to satisfy the remaining balance. The convicted cheque issuer will also have to serve time in prison for failing to fully comply with the decision of the civil court.
You should know: Returned Cheques in UAE – Punishment and Procedures
What are the penalties for bounced cheques?
The recent law amendments have introduced a couple of penalties for narrowing the scope of issuing bad cheques.
- Endorsing or issuing of a cheque knowing that there isn't sufficient balance in the bank account or the balance isn't withdrawable - penalty is a fine of a minimum of ten percent of cheque amount (should not be less than AED 1,000) with penalty doubled if cheque issuer repeats the act
- Ordering of the bank prior to date of encashment to not encash an issued cheque - imprisonment of up to two years no less than six months and a minimum fine of ten percent of cheque amount (should not be less than AED 5,000)
- Withdrawing the entire balance prior to issued cheque being presented to the drawee or bank - imprisonment of up to two years no less than six months and a minimum fine of ten percent of cheque amount (should not be less than AED 5,000)
- Deliberately writing a cheque in some way which prevents the document from being encashed - imprisonment of up to two years no less than six months and a minimum fine of ten percent of cheque amount (should not be less than AED 5,000)
- Forgery of cheques - punishment will be jail time for more than one year with a fine of AED 20,000 to AED 100,000
In addition, Article 642 states that the local court has the power in publishing its judgement of a convicted bounced cheque issuer in two local newspapers both in Arabic and the English language. The judgment will also be posted online complete with details of the convicted bounced cheque issuer such as the name, occupation, and residence. The convicted person will also be billed with the cost for publishing the judgment.
The new amendments with UAE Commercial Transactions Law are expected in producing effective and innovative solutions to emerging and prevailing challenges that are in line with best global practices. With the introduction of the amendments, competitiveness and attractiveness of the national economy will further gain its strength. This is with the support of freedom of exchange, as well as effectiveness of credit. The amendments are much needed especially with the rapid global changes at present. The local government in UAE is continuing its educational and awareness efforts in providing local government departments with updated legislative knowledge, a key fundamental towards the realization of the country's vision in establishing a reliable, distinguished, proactive, and transparent government.
You may want to know: Bounced Checks No Longer Result to Jail Sentence in UAE
Who can I seek help from for bounced cheque cases in UAE?
Only national lawyers in Dubai UAE with valid licenses are the ones that are allowed in assisting with bounced cheque cases and appearing before UAE courts. Lawyers are to be reputable and licensed by the Ministry of Justice in UAE. They also have to be registered in the country's roll of currently practicing lawyers.
For quality legal advice and guidance in navigating cases related to bounced cheques in UAE, contact us here in HHS Lawyers today!