The UAE is a vibrant business region with numerous business hubs and free zones that encourage commercial activity. Companies and investors from all over the world come here to develop businesses and seek for new chances. New businesses are constantly being developed in a location that is so conducive to doing business. However, this does not imply that every company in the UAE will be successful.
A company's survival and success are determined by a variety of factors. Many firms fail as a result of their inability to keep up with these variables. A failing company can soon become a liability for its owner. When a business ceases to function, it cannot be basically ignored. There is a formal procedure for closing a company, just as there is for founding a firm. This operation is called as liquidation, and it is very essential in the UAE.
Liquidation is the process of closing down a business. Simply explained, corporate liquidation is a solvency procedure in which a company's assets are assessed and auctioned off to pay off whatever obligations it may have. The larger a company, the more complicated the liquidation process becomes since more assets and liabilities must be considered. The liquidation procedure in the UAE can also be complicated because there are numerous authorities, each with its own set of laws for liquidation. It is critical to understand the rules and regulations that apply to your firm.
There are two types of liquidation: compulsory and voluntary. Mandatory liquidation (also known as creditor's liquidation) occurs when a corporation is dissolved forcibly in order to pay off its debts. A corporation is not driven into voluntary liquidation by a third party. It is a decision made by the corporation to pay off its debts.
A firm's shareholders may elect to liquidate a solvent corporation, or the directors of an insolvent company may choose to discontinue further trading and liquidate its assets in order to pay its creditors.
If a firm's debts are not paid on time, creditors may petition the courts to liquidate the company so that they can collect their money. In order to pay off outstanding debt, the courts may order a firm to liquidate and sell its assets.
A liquidator is a UAE-registered agency or firm, usually a chartered accounting or audit firm, who is tasked with selling the company's assets in order to earn funds to pay off any outstanding liabilities. A liquidator can be appointed by shareholders through a resolution or by the courts in the instance of compulsory liquidation. At the initial stage, once appointed, the liquidator will provide an official letter of acceptance. Once all of its obligations have been fulfilled, it will prepare a statement of affairs and the liquidator's report, both of which are required to complete the liquidation process.
Before you commence the liquidation process, you must first get your affairs in order. You must have the following required documentation.
The government gives firms a time frame during which they can pay off any debts. The notice period has a time restriction of 45 days. It is important to have all necessary duties (related to your business and your staff) completed before beginning the procedure. Aside from obtaining all of the necessary paperwork, the following tasks must be done.
Once these documents are completed, you can begin the process of closing the business. The liquidation process differs for mainland and free zone enterprises.
In order to proceed with company liquidation in Dubai, regardless of your company type, you must apply for a business license cancellation. This is significant because it informs the appropriate authorities that your firm will no longer be operational. Otherwise, when your company license expires, you may face fines and penalties.
Shareholding companies must also take care of any liabilities owed to their partners and creditors while also protecting their shares and interests.
The method of cancelling your licence is determined on the legal nature of your business. The process for sole proprietorships and enterprises is relatively simple. They can request cancellation by obtaining the necessary clearance forms from
If a corporation has shares, it must liquidate them, collect debts, and pay off creditors before it may seek for cancellation.
Companies having the following legal structures must also appoint a liquidator
In the entire liquidation process, a liquidator makes decisions. They're in charge of following
After receiving a shareholders' resolution from the company, the liquidator begins the process by issuing an acceptance letter.
Once the procedure has begun, a liquidation notice is published in at least two local newspapers in English and Arabic. Newspaper selection might be handled by liquidators in Dubai.
When necessary, the liquidator oversees the collection and distribution of the company's assets. They will also assist in the resolution of the company's outstanding liabilities.
In order to complete the liquidation process, a liquidator's report and a statement of affairs are prepared.
For mainland corporations, the liquidation process is divided into two stages.
For civil works enterprises on the mainland, the liquidation process differs. They must complete the following activities
There are three types of closures for free zone companies
This is appropriate when a corporation has no outstanding liabilities or is capable of paying off all liabilities within the next six months.
This is valid when a company approves a resolution for winding up, which is subsequently followed by a meeting of the firm's creditors.
Under the UAE's Commercial Transaction Law 18/1993, this form can be carried out by the court.
A business closure in a free zone entails alerting the local authorities as well. This is possible through the internet portal of each free zone. Once a company termination application is issued, the company director's duties, authorities, and responsibilities are terminated as well. Following the verification of this application, a notice will be made in a local newspaper. Following that, the company's final termination will begin, including with the issuance of termination letters.
If your company is located in the Jebel Ali Free Zone (JAFZA), you must notify the authorities three months before you commence the winding-up procedure. Each free zone has its own regulations for the company's dissolution.
The necessity to withdraw visas obtained on your company's behalf is standard in all free zones. Employers must also provide their employees with a 2-month notice period (with salary) as well as a gratuity payment before terminating their contracts. This is in conformity with UAE labour legislation. Employees can keep their visas as long as the company's trade license is valid.
After completing all of this, businesses must obtain applicable NOCs from utility providers and telecommunications services. They can proceed with the business closure once all of these stages have been completed.
The liquidation process can be time-consuming and costly because corporations must coordinate with a variety of external parties/authorities in order to complete everything on time. Any missing step or document will result in unnecessary delay and complication. Dhanguard provides liquidation services for all UAE entities – LLCs, free zone companies, and offshore firms – ranging from a full liquidation to aiding with a portion or portions of the process as requested by the client.
For more information regarding the Company Liquidation in Dubai contact to Dhanguard we will gladly assist you in every aspect.
Dhanguard provides the business setup and company formation services in Dubai, UAE with the guidance of our professional team of consultants. Faster and hassle-free company setup in Mainland and Freezone in UAE.
Dhanguard provides the company formation services in Dubai, UAE with the guidance of our professional team of consultants. Faster and hassle-free offshore company formation services and company formation services in Mainland and Freezone in UAE.
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