UAE: Criminalisation of bounced cheques to be replaced by preventive measures
UAE Central Bank has announced that it will amend the Commercial Transactions Law which will force banks to be creative when seeking guarantees while giving out loans to customers in the UAE. The new amendments are believed to help maintain cash flow for small and medium businesses in the country.
In addition to the decriminalisation of cheques issued without funds, the new amendment also made a partial payment of cheques mandatory for banks, unless the drawee rejects it. The amendments replace criminalisation with preventive measures such as withdrawal of chequebook from the transgressor, denying him/her the right to receive a new chequebook for up to 5 years and suspending the professional or commercial activity of the violator among others.
Businesses will not stop because of liquidity challenges as partial payment will not only satisfy suppliers but also increase customer confidence in taking up assignments for companies that are under distress because of the liquidity crunch. This amendment will also help banks recover their partial dues to the extent of the fund available in the company. The new decision will enable distressed service providers to recover their partial dues to boost liquidity.
