The United Arab Emirates (UAE) has amended the commercial transaction law, which decriminalizes the cases of bounced cheques, bringing a huge relief to many NRIs faced with heavy penalties and jail imprisonments in the Gulf country. The new law is expected to be implemented in January 2022. The present law of commercial transactions describes bouncing cheques as a criminal offence. From now on it will be interpreted as a civil offence with regard to discussing and settling the case.
The amendment suggests that efforts are taken by the UAE to fast track the economic recovery, critical for the private sector. The amendment focuses on the decriminalization of cheques issued without sufficient funds. However, criminalization of bounced cheques due to insufficient funds, where the intention is to commit fraud and forgery and is in bad faith, will stay. Also, partial payment of cheques will become mandatory.
Earlier, in case of a bounced cheque, the defaulter would get arrested, ending up in the collapse of the business. Now the solution can be found by the investors of businesses. It is a great relief for UAE businessmen. The law will help in conducting business smoothly in the country.
The changes will also be reflected in administrative penalties as issuing cheques without funds will be made tough, including withdrawal of a cheque book with the denial of the right to receive new cheque books for a maximum of five years along with the suspension of professional or commercial activity. As per the amendments, partial payment of the cheque has also become mandatory. If the amount available for payment is less than the amount on the cheque, the drawee bank must pay the amount partially, unless the bearer rejects partial payment.
The amendments are part of strategic initiatives and aim to upgrade banking laws and regulations in the financial sector to plug the legal gaps causing financial losses. The law is also intended at securing the rights of cheque bearers and beneficiaries and will also expand the collection of the value of cheques more effectively. It will also encourage the public to use modern technological and digital means of banking activities, which are more efficient and less time and energy-consuming instead of sticking to the paper cheque modes.
Decriminalization of issuance of cheques without funds is an important step in the development of flexibility of legislation regulating economic, business, trade and investment activities in the country. It will encourage and protect existing companies and will be convenient for start-ups and small-scale companies. The law will put an end to the negative effects of criminalization with regard to bounced cheques and help in resolving the debts that negatively impact the financial, banking, and commercial sectors in the country negatively. All the ongoing cases, cases in prosecution, and the cases that are already sentenced will stand cancelled due to the amendment.
Key Takeaways:
Decriminalization of cheques issued without funds
Criminalization of bounced cheques due to insufficient funds confined to cases of fraud, forgery, and bad faith
Partial payment of cheques is now mandatory
Banks must draw the partial amount from the account if the amount in the account is less than the value mentioned in the cheque unless the drawee rejects it
New amendments replace decriminalization with preventive measures
Amendments include deterrent alternative penalties to reduce misuse of cheques
Amendments will expedite the collection of cheque value in a more effective manner
