What is a bounced cheque?
Cheque issuance is considered one of the most preferred methods of payment in the UAE where bulk transactions are made. For example, rental payments, mortgage repayment as well as other one time payments involving huge amounts of money.
Cheque payment is also the only formal system of paying for services rendered to a client (company) from a contractor (service provider). That is to say that in most individual and government transactions, check payment is highly required if not mandatory. This is especially relevant for entrepreneurs considering business setup in Dubai, as financial transactions often rely on cheque payments to ensure security and compliance.
Business transactions carried out with cheques in the U.A.E in the past was a very sensitive subject since issuing another, a bounced cheque was deemed a criminal offense in the country. The cheque writer would be subjected to a court trial and possible jail time according to article (3) of the federal Law No.(3) of 1987 and federal law No. (18) of 1993 all concerning commercial transaction law which defined the case of bounced cheque as a financial crime offense. This law criminalizing cheque bounce have however been rescinded as of January 02, 2022 after the new executive order having amended the terms surrounding cases of bounced cheques.
Causes of bounced cheques in the U.A.E
- Not having the sufficient amount in your account to complete the payment as written on the cheque
- Omitting or having unclear figures in the cheque
- Deliberately making it impossible for the drawee to get the payment
- Closing or freezing the account before the cheque encashment
- Issuing cheques with unmatching signatures.
What happens if your cheque bounces before the new law (Penalties)
The legal order of 2017 stipulates that an offender with bounced cheques below AED 200,000 will be judged by prosecution without passing through the court which may be fined up to AED 10,000. Where the bounced cheque is worth AED 200,000 and above, the offender will be charged to court where the court may rule a certain fine or jail term against the offender.
Current regulation decriminalizing cheque bounce in the U.A.E
As per the federal decree law No. (14) enacted 2020 and amending the federal law No. (18) of 1993
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FAQs
How to report a bounced cheque?
First of all, check when the cheque bounced. Complaints are received within 6 months from the cheque bounce date. If this criteria is met, fill out a Cheque Execution Regulations Form available at the website of Dubai Courts and submit required documents, including a certificate of bounced cheque from your bank. All the documents must be in Arabic and must be certified. Be ready to pay 5% of the bounced cheque amount and the application fee AED 150.
In other emirates, apply at the website of the Ministry of Interior or Customer Happiness Centre.
What should the issuer of a bounced cheque do?
First of all, you need to pay the cheque amount ASAP, before the case is taken to court. If you don’t have enough money on your account, prepare a proof of your inability to pay. You will have a chance to prove that you did not do this with ill intentions. It is strongly advised to seek legal help already on this stage.
If I pay the fine, will the issue be settled automatically?
No, you will still need to pay the whole original cheque amount to the payee. You may also face further legal consequences.
What shall I do if I don’t have enough money to pay the original amount of the cheque?
Inform the other party about the problem ASAP and try to agree on paying the amount in installments. Alternatively, you can work off your debts with legal arbitration.
What shall I do if the payee doesn’t end legal proceedings after I paid the whole amount of the cheque?
Contact police or the prosecution with the documents that prove that you have paid the whole amount. This way, you will be free from legal proceedings against you.
Elena O.
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