Mazen Boustany, partner-head of UAE Financial Regulatory at Baker McKenzie Habib Al Mulla weighs in on the implications of the recently amended Decree No. 14 of 2020 decriminalising cheques with insufficient funds starting January 2, 2022.
What does this law amendment mean?
For a long time, the UAE has been relying on postdated cheques as a guarantee for most loans and other types of financing provisions.
The amendments brought in 2020 to the CTC, which will enter into force in 2022, will not bring changes to the concept of postdated cheques but will remove jail sentences for issuing bounced cheques in favour of fines and other types of administrative sanctions such as the prohibition of cheque books. It is to be noted that in Europe, cheques were decriminalised as of the 1970’s and such decriminalisation allowed for the expansion of other types of guarantees.
Mazen Boustany, partner-head of UAE Financial Regulatory at Baker McKenzie Habib Al Mulla
What has changed under it?
In fact, the recently announced changes by UAE legislators were put in place in order to adapt to the situation since for some time now filing a complaint for a bounced cheque for an amount that sums up to below AED250,000 was not going to be accepted by police stations. This is because these cheques had the brunt of transforming the police force into debt collectors as well as the disadvantage of keeping them busy from other pressing matters.
Therefore, and as mentioned above, currently a bouncing cheque for an amount below AED 250,000 will not be accepted as a criminal offense and will not be pursued by the police force but may be subject of a civil lawsuit and the cheque will be used as a commercial paper such as Promissory Note or a Bill of Exchange.
As of 2022, this will apply across the board, unless the issuance of a bad cheque has been made in bad faith or egregiously to harm the beneficiary where the criminal offense will resume.
In addition, the new amendments to the law allow for partial payment of the cheque where there is some balance in the account, pointing out that such possibility already existed before the amendment; however the amendment allowed the bearer of the cheque to refuse partial payment.
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