Bounced cheques for insufficient funds is no longer a crime in the UAE
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Bounced cheques for insufficient funds is no longer a crime in the UAE

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Mohamed Abdelrehiem and Mostafa Emad of Ibrahim & Partners explore the practical impact of legal amendments which will affect commercial cheque rules

On September 27 2020, His Highness Sheikh Khalifa Bin Zayed Al Nahyan, President of UAE, issued a new Federal Decree No. 14/2020 (the decree) amending and adding many articles to the Commercial Transaction Law No. 18 of 1993 (CTL). Most of the amendments deal primarily with commercial cheques rules. The decree also cancelled Articles No. 401, 402 and 403 of the UAE Penal Code (Penal Code), which used to penalise the issuance of cheques with bad faith or insufficient funds.

All the new amendments of the decree will come into force only by January 2022. The reason behind this delay in coming into force is to allow the market to absorb these dramatic changes, which have an effect not only on individuals (cheques issuer) but on corporates’ commercial transaction and deals too.

Before the issuance of the new law

The phrase (issuance of a cheque in a bad faith) in Article 401 of the Penal Code has always been subject to a wide interpretation by the criminal court, allowing it to consider any bounced cheque for any reason a criminal offence by the drawer of the cheque (the drawer). Therefore, the criminal liability of the drawer is usually subject to the discretionary power of the criminal court, as a result of the law not specifying certain exclusive acts clarifying what is considered to be bad faith.

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After the issuance of the decree

The decree also added articles No. 641(1) (2) and (3), which have specifically referred to exclusive acts that, if committed by the drawer, will be considered a crime of a bounced cheque punishable by a criminal sanction. The exclusive acts, inter alia, are the following:

1.   If the drawer, before the due date of the cheque, ordered the bank not to cash the cheque amount to the beneficiary;

2.    If the drawer closed the account or withdrew all the available balance before the cheque due date. Also if the drawer had a dormant account at the time of issuing the cheque, and yet issued the cheque to the beneficiary; and

3.    If the drawer has deliberately signed the cheque in a way that preclude the beneficiary of cashing it at the bank (e.g. deliberate wrong signature).

The above specific acts highlight the clear intention of the legislator to cancel the famous crime of a bounced cheque for no sufficient funds in the UAE.

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The decree has made it very clear that, only, the above acts (and others under articles 641 (1) and (3)) are considered criminal acts, which trigger the drawer criminal liability. These acts are fraudulent in nature; therefore, it is justifiable more to be punishable. However, the burden of proof here is still questionable and untested.

  • The decree further introduced a new Article No. 635 and amends Article 617 of the CTL, which aims primarily to avoid criminal lawsuits and facilitate alternative procedures for the beneficiary of the cheque to claim its value. These new amendments reflect the following:

  • The beneficiary of a cheque has the right to ask the bank, subject to the drawer account balance, for partial payment of the cheque’s value (further explanation as to the procedures is detailed under the wording of Article 617);

  • Financial institutions has no call anymore regarding the cheque beneficiary partial payment request, they must make the payment as requested, otherwise, they will be subject to criminal liability too; and

  • The beneficiary of a bounced cheque, after obtaining a certificate from the bank of no sufficient funds, has the right to use the dishonored cheque as a civil executive deed in accordance with the Federal Civil Procedures Code No. 11 of 1992. In practice, this means that a civil execution case can be directly opened against the issuer of the cheque, including the right to seize assets and movables in the name of the drawer as a sort of execution up to the cheque’s value.


By January 2022, the long waited reform to the bounced cheque crime will come into force in the UAE market. By waiving the criminal liability of a bounced cheque for no sufficient funds, this will:

  • Play a big role in boosting the business confidence between individuals and corporates. It will also promote for further investments and corporates’ trust to deal with cheques in UAE;

  • Reduce the number of travel bans imposed by the police against individuals in the UAE; and

  • Have a substantial effect on the financial institutions who greatly depend on cheques as a mean of guarantee against their facilities and personal/car loans.

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Nevertheless, the new amendments preserve the cheque beneficiary's rights by considering the cheque as an executive deed, which fast track the collection process through the civil court. However, it as well protects the drawer’s legal position from the criminal court’s wide discretionary power that used to consider any bounced cheque a crime regardless of the reason behind issuing the cheque.

The above is only a summary and an overview of the new decree, and not legal advice in any way. Further practical obstacles will likely arise once the decree comes into force.

Mohamed Abdelrehiem

Partner, Ibrahim & Partners



Mostafa Emad

Associate, Ibrahim & Partners



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