What happens if a company cheque bounces in the UAE?

A company issues a cheque to a supplier, a landlord, or a contractor. The cheque is presented to the bank and returned unpaid. What follows depends on why the cheque bounced, how much it was for, and whether the drawer acted in good faith.

Short answer

• A bounced cheque due to insufficient funds is treated as a civil matter under Federal Decree-Law No. 50 of 2022 (the Commercial Transactions Law). It is no longer automatically a criminal offence.
• The returned cheque functions as an execution deed, meaning the beneficiary can go directly to the Execution Court without filing a separate civil claim.
• Criminal liability still applies where the cheque was issued from a closed or frozen account, where the drawer deliberately prevented payment, or where forgery or fraud is involved.
• Fines for cheques under AED 200,000 range from AED 2,000 to AED 10,000 depending on the cheque's value. Cheques over AED 200,000 are referred to the criminal court.
• The beneficiary must present the cheque within six months of the date written on it. After that, it becomes stale for banking purposes, though civil claims may still be pursued.

Who this applies to

This applies to any company — mainland, free zone, or otherwise — that issues or receives cheques drawn on a UAE bank account. It applies equally to sole establishments, LLCs, branches of foreign companies, and individuals signing cheques on behalf of a corporate entity.

It does not apply to cheques governed by the rules of the ADGM or DIFC, which operate under separate common law frameworks and do not use the UAE Commercial Transactions Law. Companies operating in those jurisdictions should seek specific advice on their own cheque and payment instrument rules.

The distinction matters because the enforcement route, the applicable court, and the available remedies differ significantly depending on whether the cheque falls under federal UAE law or a free zone's own legal framework.

The legal position since 2 January 2022

Before 2022, issuing a bounced cheque in the UAE was a criminal offence under Article 401 of the former Penal Code, regardless of the reason. The beneficiary would file a police complaint, which could lead to a travel ban, arrest warrant, and criminal prosecution of the drawer. This system placed significant pressure on UAE courts and law enforcement, and it did not always result in recovery of the cheque amount.

Federal Decree-Law No. 50 of 2022, which replaced the earlier Commercial Transactions Law (Federal Law No. 18 of 1993), fundamentally changed this position. Under Article 630, a drawer must only issue a cheque if sufficient funds are available to honour it at the time of issuance. However, if the cheque is returned solely because of insufficient funds, the matter is now treated as a civil enforcement issue — not a criminal one.

This reform was part of a broader legislative overhaul that accompanied the UAE's golden jubilee, affecting more than 40 federal laws. Its purpose was to separate genuine financial difficulty from fraudulent conduct, and to redirect enforcement resources toward faster civil recovery.

How civil enforcement works in practice

When a cheque is returned due to insufficient funds, the bank issues a return memo to the beneficiary. Under the 2022 law, that returned cheque is classified as an executive instrument — equivalent to a court judgment for enforcement purposes.

The beneficiary files the returned cheque and the bank's return memo with the Execution Division of the relevant UAE court. The Execution Judge may then order the drawer to pay the full amount within 15 days. If the drawer does not pay or raise a valid objection within that period, the court may impose a travel ban or issue an arrest warrant to compel payment.

This process is significantly faster than the previous criminal route. It avoids the need for a full civil lawsuit or a police complaint, and it places the cheque holder in a stronger position to recover funds quickly.

Banks are also now required to make a partial payment to the cheque holder if the drawer's account contains some but not all of the funds. Under Article 648, the bank must release whatever balance is available unless the beneficiary refuses to accept a partial amount. This partial payment is recorded on the cheque itself, and the beneficiary may then pursue the remaining balance through execution.

When criminal liability still applies

The decriminalisation applies only to cheques that bounce because of insufficient funds. Several categories of conduct remain criminal offences under Articles 673 to 684 of the Commercial Transactions Law.

Issuing a cheque from a closed or frozen account exposes the drawer to criminal prosecution. So does deliberately withdrawing funds to prevent a cheque from clearing, instructing the bank to stop payment without lawful justification, or signing the cheque in a way designed to prevent it from being honoured. Forgery, alteration, or fraudulent use of a cheque also carries criminal penalties, including imprisonment and fines.

For cheques under AED 200,000, criminal proceedings may be avoided by paying a prescribed fine. The fine structure is as follows:

There is an additional banking consequence to be aware of. Under UAE Central Bank regulations, if four cheques are returned from a single account within one year due to insufficient funds, the bank is required to close that account. If a cheque is subsequently presented against a closed account, the beneficiary may file a criminal complaint — because the return is no longer for insufficient funds but for account closure, which falls within the criminal categories.

Time limits the beneficiary must observe

A cheque must be presented for payment within six months from the date written on it. After that period, it becomes stale and banks will not process it. The beneficiary does not lose all recourse — a civil claim based on the underlying debt may still be available — but the cheque itself can no longer be enforced through the expedited execution route.

The statute of limitations for claiming the value of a cheque is two years from the expiry of the six-month presentation period, giving a total window of two years and six months from the date on the cheque.

Companies that hold post-dated cheques as security — common in real estate, construction, and long-term supply arrangements — should track these dates carefully. A cheque that expires without presentment weakens the creditor's enforcement position considerably.

What companies should do next

Companies that issue cheques should ensure that funds are available on the date written on each cheque, not merely on the date the cheque is handed over. The legal obligation under Article 630 attaches to the date of issuance as stated on the instrument.

Companies that receive cheques should present them promptly, within the six-month validity window, and should not delay in filing with the Execution Court if a cheque is returned. The speed of the new civil enforcement route is one of its principal advantages, and that advantage is lost through delay.

Where a cheque has bounced and the circumstances suggest deliberate misconduct — a closed account, a stop-payment instruction, or a pattern of dishonoured cheques — the criminal route remains available and may be appropriate.

Legal advice may be required to assess whether a specific bounced cheque falls within the civil enforcement framework or triggers criminal liability, particularly where the cheque value exceeds AED 200,000 or where the drawer has disputed the underlying obligation.

This article reflects the position under UAE federal law as at February 2026. It does not constitute legal advice. The enforceability of cheques, available remedies, and applicable penalties may differ depending on the emirate, the court, and the specific facts of each case. Companies should seek legal advice tailored to their circumstances.

Related: How to Clear a Cheque Bounce Case in Dubai · Bank Guarantees in UAE Commercial Contracts · Enforcing and Defending Liquidated Damages in the UAE

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