UAE Commercial Transactions Law: Latest Amendments Concerning Bounced Cheques


With Federal Decree Law no. 14 of 2020 coming into effect, fundamental amendments are made to the Commercial Transactions Law promulgated by Federal Law no. 18 of 1993.

The new decree law covers matters relating to commercial cheques rules, amending 7 articles of the Commercial Transactions Law and adding 9 new articles, while repealing 3 articles of the Penal Code that used to criminalize cases of issuing cheques with bad faith, namely; Articles 401, 402, and 403.

In the following article, we will shed light on the most important of these amendments and expand on their effect on commercial transactions and the use of cheque as the preferred instrument of payments for individuals and commercial entities alike.

Limited Criminal Liability

Repealing Articles 401, 402, and 403 of the Penal Code, the new amendments have narrowed the scope of criminal liability of writing bad cheques. This means that some cases of bounced cheques are no longer prosecutable, notably the case of bounced cheques for insufficient funds, stipulated in the now-repealed Article No. (401) of the Penal Code.

Article (401)

“Detention or a fine shall be imposed upon anyone who, in bad faith, gives a draft (cheque) without a sufficient and drawable balance or who, after giving a cheque, withdraws all or part of the balance, making the balance insufficient for settlement of the cheque, or if he orders a drawee not to cash a cheque or makes or signs the cheque in a manner that prevents it from being cashed.”

Alternative provisions introduced by the new amendments are discussed later in this article.

The Bounced Cheque as a Writ of Execution  

Before the amendments entering into effect, the beneficiary of a bounced cheque had to go through lengthy procedures, either by filing a commercial case or requesting a payment order, meaning that they had to deal with the subsequent time-consuming proceedings at the three degrees of litigation before being able to recover their dues.

As of now, the bearer of a bounced cheque for insufficient funds can use the cheque itself as a civil writ of execution in accordance with the executive regulations of the Federal Civil Procedures Code No. 11 of 1992. In other words, the beneficiary can initiate the enforcement proceedings directly before the execution judge without the need to file a claim.

According to Article (635) Bis added in the new decree-law:

“A cheque, which bears the drawee’s stamp as non-paid for unavailable or insufficient fund, shall constitute an executive instrument as per the Executive Regulation of the Federal Law No. (11) of 1992 and its bearer shall have the right to demand the coercive enforcement, wholly or partially.”

Partial Payment of Bounced Cheques

In reference to Article No. 635 bis mentioned above, and pursuant to the wording of Article 617, the beneficiary of the cheque has the right to ask the bank for partial payment of the cheque’s value if the available fund is less than the amount of the cheque, and the drawee must partially fulfill the amount in its possession unless the bearer requests otherwise. The drawee shall also, upon each partial payment, initial the back of the cheque confirming the partial payment and give back the original cheque to the bearer along with a certificate to that effect. Such certificate shall validate the right of the bearer to demand the payment of the remaining amount against the original of the initialed cheque as per Article (635) Bis or to submit a protest after the expiry of time limits provided for in Article (632).

Furthermore, to guarantee the partial payment of the beneficiary’s due, the new amendments prescribed under clause (D) of Article (641) a fine of “no less than 10% of the cheque value, subject to the minimum of AED 5,000, and no more than twice the cheque value against the bank which refuses to render partial payment of a cheque, issue a relevant certificate, or give back the original of the cheque as per the provisions stipulated in (2) of Article (617) of this Law.”


While narrowing the scope of liability of writing cheques in bad faith, the new amendments further specify the cases that bear criminal liability, by amending new articles referring to exclusive acts that, if committed by the drawer, will be considered a crime of writing cheques in bad faith. In addition, new penalties are prescribed for specific cases, some of which are introduced for the first time.

New articles

Article no. 641 bis (1) stipulates a penalty of no less than 10% of the cheque value, subject to the minimum of AED 1,000 and no more than the cheque value, for endorsing or delivering a bearer cheque while knowing that there is no sufficient funds to pay such cheque or that such cheque may not be drawn.

A jail term between 6 months and 2 years and/or a penalty of no less than 10% of the cheques value (minimum of AED 5,000) and no more than double the cheque value is stipulated under Article 641 bis (2) for whoever commits any of the following acts:

  1. “Ordering or asking the drawee, prior to due date, not to pay the value of a cheque he has issued, with the exception of the cases provided for in Articles (620) and (625) of this Law.
  2. Closing the account or withdrawing all available fund therein before issuing the cheque or before presenting the cheque for payment or if the account has been frozen.
  3. Deliberately writing or signing the cheque in a way that make it unpayable.”

A harsher punishment of jail term for no less than one year in addition to a penalty of no less than AED 20,000 and no more than AED 100,000 is prescribed under Article 641 bis (3) for whoever commits any of the following acts:

  1. “Forgery or counterfeiting of a cheque or attributing it to a third party by changing details through addition, deletion or other means as provided for in Article (216) of the said Federal Law No. (3) of 1987 with the objective of damaging a third party and with objective of using it for the aim of its forgery.
  2. Knowingly using a forged or counterfeit cheque.
  3. Knowingly accepting funds paid through a forged or counterfeit cheque.
  4. Using a true cheque issued in the name of others, inappropriately benefiting from it, or using it in relation to a crime of fraud.
  5. Knowingly, importing, manufacturing, holding, selling, offering or providing any tools, equipment, software, information or date used in a crime of forgery as provided for in this Article.”

On top of all that, “a punishment of life imprisonment in addition to a penalty of no less than AED 500,000 and no more than AED 1,000,000, shall apply for any crime provided for in Article (641) Bis (3) of this Decree Law committed for the objective of terrorism,” according to Article no. 641 bis (4).

A Disincentive

To say nothing of the penalties of imprisonment and fines in the new amendments, Article No. 642 will represent a deterrent against anyone who violates the law; as it states that if the court issues a conviction for one of the crimes provided for in Articles 641 bis (1) to 641 bis (3), it “may order the publication of judgment synopsis at the expense of convicted defendant in two widely circulated daily newspapers in the UAE, one in Arabic and one in English, or in two e-publishing media to be determined through the decision of the Ministry of Justice, one in Arabic and one in English.” Such synopsis shall include the convicted defendant’s name, address, profession, and ordered penalty; publication shall be compulsory in case of repetition.

Withdrawal of Existing Cheque Book

Whereas Article no. 643 stipulated the penalty of the withdrawal of existing cheque book from the convicted defendant, the amended article stipulates further consequences for cases of refusal of the convicted defendant to surrender their cheque book.

“Convicted defendant who does not surrender their existing cheque books to respective banks within fifteen (15) days from notifying them to do so shall be sentenced to a penalty of no less than AED 50,000 and no more than AED 100,000.”

The same article also introduced a new penalty for banks that violate the order provided for in the article:

“Any bank which violates the order provided for in the above two paragraphs of this Article shall be sentenced to a penalty of no less than AED 100,000 and no more than AED 200,000.

Seizure of Items

According to Article (643) Bis (1), when a defendant is convicted for any of the crimes provided for in Article (641) Bis (3) of this Law, “the court shall order the confiscation of items used in such crimes.

Still further, where using, holding, owning, selling or offering for sale such items constitute a crime, the article explicates that the court shall order the confiscation of the said items even when they are not the property of the defendant.

Prohibition of Conducting Professional or Commercial Business

Article 643 bis (2) states that “where the Court convict a defendant for any of the crimes provided for in Articles (641) to (641) Bis (4) of this Decree by Law, it may prohibit the convicted defendant from conducting any professional or commercial business for up to three (3) years if the crime committed in relation to or due to conducting the business.

However, whoever repeat committing the same crime after having been prohibited shall be subject to imprisonment for no less than one year and a penalty of no less than AED 50,000 and no more than AED 100,000 or any of them, according to the said article.

Cheque Crimes Committed by a Legal Person

Under the old law, committing a cheque crime by a corporate entity entailed criminal liability to the natural person authorized to sign the cheques whether he/she was aware of the crime or not. From now onwards, the criminal liability of signing cheques in bad faith by an authorized natural person is removed under Article 644 bis (1), provided that he or she is proven to have had no knowledge of the crime or that such person has not committed the crime for his or her own benefits or those of another.

As a way of alternative, the article states that “where the liability of the natural person is not evident, the legal person shall be subject to a penalty of no less than twice the legally applicable penalty for this crime and no more than five times of it.”

Furthermore, the article also allows for “the suspension of the legal person’s business for no more than six months, and in case of repetition, cancelation of trade license or dissolution of the legal person.”


The changes introduced by the new amendments are of great significance in various respects; the most remarkable of which is enhancing the strength of the cheque as the preferred instrument of payment, through introducing effective alternatives that ensure speed and simplification of cheque collection procedures, while bringing in new penalties that are commensurate with the respective cheque crimes.

In any case, the UAE Central Bank had given a period of more than one year from the date of publication in September 2020 for banks and companies as well as law enforcement bodies to prepare for the amendments and settle protective measures against dishonored cheques.

It is worth noting that the new amendments have entered into force on January 2nd 2022.

For more information about the new amendments to the Commercial Transactions Law, do not hesitate to contact us on the numbers shown below or visit our office……


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