The Central Bank of UAE in an effort to bring international best practices to the UAE economy, has announced a New Transaction Law – ‘Decriminalisation of Bounced Cheques’.
This updated law has been made effective from January 2, 2022.
This updated law on bounced cheques will bring up UAE’s Business environment up to international standards. This will make the UAE a much more attractive place to invest in.
The bottom line is that the changing regulation surrounding bounced cheques will help the SME’s with their cash flow management.
Some of the major changes that are being introduced are :
- Partial Payment : The Banks will now be required to make partial payments from the accounts if the amount in the account is less than the value of the cheque. In this way, the suppliers will have more flexibility and confidence in taking up projects. The updated law also bring emphasis on how the collection of cheque value can be expedited.
- Decriminalisation : The updated law focuses on preventive measures. As a result, the cheques that are issued without funds will be decriminalised, unless it is proved that the cheque bounces due to fraud, forgery or with malafide intentions( i.e., in bad faith).
- Penalties : The major focus of the updated law is to implement deterrent alternative penalties to minimise misuse of the cheques. As per the amended provisions, the chequebook will be withdrawn from the transgressor. Further, he/she may also lose the right to receive a chequebook for the next 5 years. In addition to that, the commercial or professional activity of the violator may also be suspended.
With these updated and amended provisions, the UAE Government aims to improve business standards in the UAE. With such efforts to follow international best practices in the UAE economy, it would surely become an attractive place to invest in and conduct business. This means, there would ultimately increase in UAE’s ranking in the “Global Competitive Index”.
Further, it would help in reducing the workload of the UAE courts by reducing bounced cheque related cases.
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