UAE amends criminal sanctions involving bounced cheques
The On 26 October 2020, the UAE Cabinet approved a cabinet resolution amending certain provisions of the Federal Law No. 18/1993 promulgating the UAE Commercial Code, (“the Resolution”). The amendments made by the Resolution, which will come into force by the end of 2022, include modification of rules dealing with dishonoured cheques and the issuance of cheques without value.
The Resolution includes the following amendments: (a) provision to the issuers and beneficiaries of dishonoured cheques additional opportunities at reconciliation;
(b) possibility for the beneficiary of a dishonoured cheque to file a direct claim with the execution judge at the execution court to confiscate the assets of the issuer;
(c) avoidance of criminal lawsuits by encouraging alternative procedures of dispute resolution. The Resolution encourages payment of the amount of dishonoured cheques as the primary condition for withdrawing a criminal action against a debtor;
(d) introduction of additional sanctions, including cancelling the cheque books of individuals convicted of dishonouring a cheque and preventing them from obtaining new cheque books for up to five years. The professional or commercial activities of convicted individuals may also be suspended for up to six months. In case of repeated offences, the professional or commercial activities may also be revoked, or the offender may be forced to bankruptcy (if the cheque was issued on behalf of a corporate entity); and
(e) introduction of a mechanism for the operation of joint bank accounts: Upon a joint account holder’s demise or loss of control over the bank account, the other joint account holder(s) must notify the bank within ten days from the date of death or disqualification of the first joint account holder, and the bank must then limit the ability to withdraw from the joint account beyond the deceased / disqualified account holder’s share of the account balance.
The reconciliatory measures introduced by the amendments will boost the confidence of businesses and reduce pressure on the courts that at present adjudicate criminal litigation involving dishonoured cheques. The amendment to the law (once it is published in an Official Gazette) may provide further explanation on the areas that are covered under the existing legislation but not followed in practice.
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