The economic downturn has resulted into a nightmare for many individuals in the UAE. Hundreds of individuals are currently being imprisoned for bounced cheques as booming businesses went bust. For one Irishman, the nightmare of prison and a lengthy jail sentence is looming large, forcing him to resort to a hunger strike. This person was the managing partner of a building company, and was jailed after late payments from a client that resulted in cheques that he had written to contractors to be dishonoured by the banks due to insufficient funds. Read more about this case.
What is the law on bouncing a cheque?
Article 401 of the UAE Penal Code provides that bouncing cheques shall be punishable by confinement or a fine to any individual who, in bad faith, writes a cheque without sufficient funds.
In the UAE, it is a common practice for banks to demand blank cheques from customers as security against credit cards or loans offered to them. However, before signing any cheque, it should be remembered that bouncing a cheque is illegal in the UAE. In other words, if a cheque is presented without adequate funds to cover the amount, the person who signed the cheque can face both criminal and civil charges. Furthermore even after the person has serviced the jail sentence, he may still not be able to leave the country until the funds have been paid in full. Here are a few practical tips on how to avoid such a situation.
- Avoid signing blank or undated cheques, only sign cheques after all details have been completed.
- Make sure that you have sufficient funds available in your account before writing a cheque. Do not sign cheques if you do not have sufficient funds or if the funds will not remain in your account until the cheque is deposited or cashed by the other party.
- It is important to keep accurate records of your accounts including every cheque that is written, to whom it is payable, when it is dated and how much it is for. Do not unwittingly withdraw money before the cash is taken out to pay for the cheque.
- All financial records should be consistently cross-checked against the available balance in the bank account to ensure there are always sufficient funds to cover the value of the cheques.
- If any of your cheques does bounce, speak immediately with the bearer of the cheque to reschedule the payment. If the matter becomes out of control, contact your lawyer immediately.