The UAE Cabinet has approved amendments to the Federal Law No. 18 of 1993, commonly known as Commercial Transactions Law. The approved Decree-Law shall come into force in the year 2022 and the provisions shall apply when the Decree-Law is published in the Official Gazette.
The new provisions aim to discourage criminal proceedings against people and businesses for cheque bouncing cases. The amendments provide fast and advanced civil mechanisms to collect the outstanding payments. They facilitate related procedures through encouraging reconciliation and urging the payment of original cheque as the condition for minimizing criminal charges.
The amendments redefine the criminal offences related to cheques to include:
The criminalization presently in the Penal Code has been removed for intentionally writing or signing the cheque in a way that prevents it from being cashed or issuing cheques without balance, except for the instances mentioned in the Decree-Law.
Mechanisms and Alternatives envisaged in amendments for Collection
When a joined account is opened between two or more people and if one of the account holders dies or loses legal control, the other person shall notify the bank within ten days of the date of death or disqualification. From the date of notification, the bank must limit the ability to withdraw from the joint account within a party’s share of the account balance on the day of death or loss of eligibility. The bank must stop allowing withdrawing from that person’s share until the successor is appointed.
The Federal amendment is a move for UAE to keep up with global best practices and to boost business confidence by enhancing the competitiveness of the national economy and increasing its attractiveness. It constitutes a qualitative step and an important motivation to support the economic, legislative and social sectors, which would contribute to achieving the strategic objectives aimed overall societal development. This is a positive step for both defaulters and creditors.
Cheques may be an outdated method of payment, but it is unlikely that the practice of using cheques in the UAE will end with the new amendment. The banks and landlords will not stop demanding cheques from their borrowers and tenants. A cheque serves as a tool of pressure to bind the debtor to make the outstanding payments and evidence before the courts. They will continue to serve as an important instrument in commercial transactions.