In the United Arab Emirates, a cheque bounce is a very common problem that many people usually face. Consequently, as it is a frequent issue, some legal implications and penalties cover it. A bank cheque is the most common way to do financial transactions in the region. Therefore, it is important to ensure the UAE cheque validity before accepting one.
In this article, we will be discussing everything you need to know about bounced cheques and cheque validity in the UAE. This type of problem typically occurs in commercial transactions; such as company exchanges, property rents, bank loans, and more. Let us learn more about the issue:
- What is a bounced cheque?
- Penalties for issuing a bounced cheque in the UAE
- Frequently asked questions about UAE cheque validity
- How is the filling process of a bounced cheque case in Dubai?
- How can Connect Group help you in the case of a failed UAE cheque validity?
What is a bounced cheque?
Bank cheques are a common tool for individual and business transactions in the UAE. Accepting this payment method is not an issue in any region; however, it is important to see the validity of a cheque beforehand as they come with a risk. When the cheque you provide gets returned or bounced, it can bring legal and civil issues against you.
A dishonored cheque or bad cheque is presented by the payee and rejected by the recipient’s bank. This can happen when:
- The drawer requests that the cheque not be cashed before the due date.
- Before the due date, the drawer closes the account or withdraws the available sum.
- The cheque is signed incorrectly and on purpose.
- The drawer purposefully writes or signs the cheque incorrectly.
1.1 What is the law against bounced cheques in the UAE?
The law that goes against wrong UAE cheque validity is the Federal Law N° 18 of 1993 which promulgates Commercial Transactions. However, in 2020 it received changes with the Federal Decree Law N° 14. As a result, the process to ensure justice is faster.
According to the new rule, banks must pay the cheque holder a portion of the money if it is not in the account in full. The option to decline is still available to the account. Earlier legislation required the account holder to instruct the bank to execute this partial payment, which is how the current law differs.
In previous years, you had to notify the police of a bounced check in the UAE. However, under the new law that ensures the validity of a cheque in the UAE, a person can go straight to the court’s execution judge to request a complete payment order. The new procedure makes sure to respect the rights of all parties concerned and is relatively simpler to carry out.
1.2 Decriminalization for wrongful cheque validity in the UAE
The UAE has made one significant change to the penalties for bounced cheques. In most cases, jail time will not be necessary; nevertheless, severe financial sanctions are still in place.
There can be legal implications if:
- Before the due date, the drawer requests that the bank not cash the check.
- The drawer closes the account or takes the available funds out before the due date.
- The cheque is intentionally and incorrectly signed which violates the UAE cheque validity.
- The drawer purposefully miswrites or incorrectly signs the check.
Penalties for issuing a bounced cheque in the UAE
If the UAE cheque validity is null and the cheque ended up bouncing, you may suffer penalties. According to the most recent amendment, the fine for a returned check in the UAE is based on the amount owed. Let us observe:
- If the cheque amount is less than AED 50.000 the fine is AED 2.000.
- Bounced cheques from AED 50.000 to AED 100.000 will receive a fine of AED 5.000.
- Lastly, bounced cheques from AED 100.000 to AED 200.000 will be fined AED 10.000.
If someone forges or counterfeits a check, they will be sentenced to at least 12 months in prison and a minimum fine of AED 20.000 (up to AED 100.000). Similar punishments apply when a third party is identified on a check by changing any information.
Honoring the validity of a cheque in the UAE is one of the guidelines for managing a cheque account. The cheque must be honored while it is still valid. Note that the cheque date validity in the UAE is six months after the date it was issued.
Frequently asked questions about UAE Cheque validity
3.1 What happens in the case of a bounced cheque?
In the UAE, a payee who gets a faulty cheque has the right to pursue legal action against the drawer. They can now directly petition the court’s execution judge for help. The current procedure for filing police complaints has been altered to advance the process. Because most instances are now decriminalized, police involvement is no longer required.
3.2 What should the drawer do in case of a bounded cheque?
The best course of action is to pay the cheque amount as quickly to prevent taking the matter to court. However, you may lack the resources or capacity to pay the sum. It is advisable to create a confirmation of your innocence and proof of your incapacity to pay in such cases. You can convince the judge that you did not send a cheque while forgetting the UAE cheque validity.
How is the filling process of a bounced cheque case in Dubai?
- Firstly, fill out the Cheque Execution Regulation form with the necessary documents.
- Then, you must submit these documents along with the application. This includes the certificate of dishonored cheque from the financial entity.
- It is important that you translate the documents if they are not in Arabic, also, you will be asked to certify them with the competent authorities.
- The deadline for bringing a complaint is six months after the date the UAE check bounced.
- Lastly, once the application is ready for execution, you must pay AED 150 as the application fee and 5% of the value of the bounced check.
4.1 What happens if I issue a cheque in good faith and it is dishonored?
Even if your check is returned, you are still subject to legal action because you should have checked the UAE cheque validity before issuing it. You can, however, pay the sum back or provide proof of innocence and ask for a fair time to honor your payment.
4.2 Does the bounced cheque problem can come to an end if I just pay the fine?
No, the punishment merely serves as a disincentive to dissuade people from writing checks that have no UAE cheque validity. It adds to your financial obligations. Unless the recipient agrees to forego the amount, you must still pay the entire cheque amount to the recipient or face severe legal repercussions.
4.3 What if the person does not have the money to pay the fine?
In this instance, you have a few things to consider. As soon as you realize you have an insufficient balance, it is important to consult with the other party and devise a strategy to pay the money in acceptable installments. The other option is to employ the UAE’s new insolvency law and negotiate out your obligations through formal arbitration.
4.4 What happens if I paid the fine, but the receiver does not want to end the legal proceeding against me?
In this circumstance, you can avoid additional civil and criminal actions in the UAE for a bounced cheque by contacting the police or public prosecution with adequate evidence of the said transaction. This will bring the legal procedures against you to a close.
How can Connect Group help you in the case of a failed UAE cheque validity?
Connect Group can be your main ally if you have a failed UAE cheque validity case, and more. Our company can provide you with the best legal services, which can refrain you from suffering strong penalties for your bounced cheque case.
In addition, we provide the following business services:
- Visa solutions.
- IT outsourcing.
- EOR and PEO.
- HR outsourcing.
- Banking services.
- Real estate services.
- Cybersecurity.
- Hosting services.
- PRO services.
- Payroll outsourcing.
- Remote workers hire.
- Employee benefits.
- Workforce insurance.
- Business formation services.
Do you have any problems with your UAE cheque validity?
Contact us now! Send us an email at contact@connectgroup.co or call us at +971 43 316 688 and let us know about your legal issues. Thanks to our excellent team of high-quality professionals, you can rest assured that we will help resolve all your concerns.
