UAE Updates Cheque Law: What You Need to Know
In September 2020, the United Arab Emirates introduced Federal Decree Law No. (14) of 2020, amending certain provisions of the Federal Law No. (18) of 1993 concerning the Commercial Transactions Law. These amendments, effective from January 2, 2022, aim to modernize the UAE's commercial legal framework, particularly in relation to cheque transactions.
Decriminalization of Bounced Cheques
A significant change introduced by the decree is the decriminalization of bounced cheques due to insufficient funds. Previously, issuing a cheque without sufficient funds could lead to criminal charges. Under the amended law, such cases are now treated as civil matters, reducing the criminal liability for individuals and businesses. However, certain actions related to cheque misuse remain criminal offenses, including:
- Forgery or counterfeiting of cheques
- Deliberate issuance of cheques from closed accounts.
- Stopping payment on a cheque without valid justification.
- Deliberately writing or signing a cheque in a way that prevents its payment.
These provisions aim to deter fraudulent activities while alleviating the legal burden associated with bounced cheques.
Partial Payment of Cheques
Another notable amendment is the introduction of partial payment for cheques. If a cheque's account lacks sufficient funds to cover the full amount, banks are now required to pay the available amount unless the beneficiary refuses partial payment. The drawee bank must certify the partial payment on the back of the cheque and provide the bearer with the original cheque and a certificate detailing the partial payment. This measure ensures that beneficiaries receive at least a portion of the owed funds promptly.
Administrative Penalties and Preventive Measures
To further regulate cheque transactions and prevent misuse, the amended law introduces administrative penalties, including:
- Withdrawing chequebooks from offenders and prohibiting them from obtaining new ones for up to five years.
- Suspending the issuance of new chequebooks to convicted individuals.
- Imposing fines on banks that violate these provisions, ranging from AED 100,000 to AED 200,000.
These measures are designed to promote responsible cheque issuance and usage within the UAE's financial system.
Implications for Businesses and Individuals
The amendments reflect the UAE's commitment to enhancing its commercial legal framework, balancing the need to deter fraudulent activities with the goal of facilitating smoother business operations. By decriminalizing certain aspects of bounced cheques and introducing mechanisms like partial payments, the law aims to create a more business-friendly environment while maintaining the integrity of financial transactions.
For businesses and individuals, it's crucial to understand these changes and adapt their financial practices accordingly. Ensuring sufficient funds are available when issuing cheques and being aware of the remaining criminal liabilities associated with cheque misuse are essential steps in navigating the updated legal landscape.
In conclusion, Federal Decree Law No. (14) of 2020 introduces significant reforms to the UAE's Commercial Transactions Law, particularly concerning cheque transactions. These changes aim to modernize the legal framework, reduce unnecessary criminalization, and promote a more efficient and trustworthy commercial environment in the UAE.
“For a comprehensive understanding of Cheque Law, refer to the official document:Federal Decree Law No. (14) of 2020 Concerning the Commercial Transaction Law.pdf.aspx“
