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Summary
The UAE Federal Penal Code (Federal Law No. 3 of 1987) provides for criminal sanctions for any issuer of a bounced cheque. This is widely regarded as an outdated approach, creating a hostile environment for the conduct of business, particularly for finance directors and others who sign company cheques as part of their daily routine. Faced with the threat of imprisonment for dishonored cheques, and prior to an effective insolvency regime being implemented in the UAE, it was not uncommon to hear of managers of SMEs fleeing the country rather than attempting to work through cash flow or insolvency issues. In many cases, businesses find themselves in this position through no fault of their own where they are themselves awaiting payment.

The new Federal Bankruptcy Law (Federal Decree Law No. 9 of 2016) provided some relief by providing a modernized restructuring and insolvency framework, and allowing for a stay of criminal proceedings relating to bounced cheques which were issued prior to the commencement of a scheme of composition or restructure.