Commercial companies aim to develop businesses and their economic position to regulate companies with global changes. The UAE is any tractive business region with lots of business hubs and free zones. Investors and companies come from all over the world to establish companies. It is an ideal place for businesses to establish new companies. However, doesn’t mean that every company in the UAE is successful.
The success and survival of the business depends on many factors. Many businesses are unable to keep up and they end up failing. A failing business can turn into a liability for its owner. You cannot abandon a business when it stops giving you profit. Just like with a working company, there is a formal procedure for closing the company. In UAE the procedure is known as liquidation, and it is crucial to follow.
What is liquidation?
liquidation is about winding up a business in the UAE. Company liquidation is a solvency process in which facets of the company are valued and sold off to clear the debts. If the business is larger the liquidation process becomes complex. Becomes complex because the assets and liabilities have to be dealt with. The liquidation process in the UAE can also be tricky because there are numerous authorities with their own rules for liquidation.
There are two kinds types of liquidation voluntary and mandatory. Voluntary liquidation is not forced on a company by any third party. However mandatory liquidation is carried out when a company is dissolved forcibly to pay off their debts.
Liquidation process in UAE
Whenever you think to start the liquidation process in UE you must gather some essential documents.
- Copy of your business license. Get a renewed business license if it is expired.
- Memorandum of association with a copy of any changes.
- Copies of all shareholders’ passports.
- Power of attorney.
- Shareholders resolution.
- Copies of Emirates ID.
- Deregistration application.
- Liquidation notice period
The government crowns businesses’ notice period. In this notice. They can cater to any debts. The notice. Has a limited duration of 45 days. Before you start in this process it is best to have all essential tasks dealt with. You have to consider these blue dots apart from arranging the required documents.
- Pay off all pending telecommunication bills.
- Pay off all pending utility bills.
- Prepare a liquidation audit report.
- Obtain a bank account closure letter.
- Cancel any visas that have been obtained under the current business license.
Once you have prepared all these documents you can start the process of closing the company. However, you have to understand that the liquidation process for free zone companies and mainland companies is different.
Liquidation process for mainland company
For companies’ liquidation in Dubai, you need to apply for a business license cancellation to proceed with the closure of your business. It is crucial to notify the relevant authorities that your business is no longer going to be active. Otherwise, you may end up having to deal with penalties or fines when your business license expires.
Shareholding companies need to take care of all liabilities for their creditors and partners while also protecting their interests and shares.
Business license cancellation
The license cancellation process relies on the legal nature of your business. Establishments and sole proprietorships are an easy process. They can apply for cancellation by getting the clearance forms from:
- Ministry of human resources and Emiratization
- Directorate of residency and foreign affairs
- Their leasing entity
- the relevant water and electricity authority
If a company has shares, then it will have to liquidate its shares as well. They will collect taxes and pay off their creditors before it can play for cancellation.
Appointing a liquidator
Companies with the following legal forms need to higher or liquidator as well:
- General partnership
- Private joint stock company
- Limited liability company
- Public joint stock company
- Simple limited partnership
A liquidator is like a decision-maker in the entire reputation process. They are responsible for:
Starting the winding-up process
The liquidator issues an acceptance letter in the beginning after they have received a resolution from the shareholders of the company.
Liquidation notice publication
a liquidation meter is published in Arabic and English in at least two local newspapers. Liquidators in Dubai can handle the selection of the newspaper.
Distribution and collection of entities’ assets
The liquidator also oversees the distribution collection of companies’ assets when required. They will also take part in settling the outstanding liabilities of the company.
Preparation of statements of affairs
The liquidator report and a statement of the fair are prepared as well to finalize the liquidation process.
In the liquidation process for free zone companies
For free zone companies, there are three types of closures:
Some rewinding up
This is valid right now because the company has no outstanding liabilities. The companies might be able to pay off all liabilities within the next three months.
Creditor winding up
This is applicable when the company passes a resolution for winding up. It is then followed up with a company creditors meeting.
Bankruptcy
This type can be carried out by the court, under the commercial transactions law 18/1993 of the UAE.
How can ebs help?
ebs is an approved liquidator for freeze zone and mainland companies. We have a highly qualified and experienced team of liquidators who can take over your entire liquidation process. Our experience and learning curve allows us to complete the job in the best possible way. We charge the minimum possible fee from our customers. We are looking forward to working with you on the liquidation process.
We also provide other services such as VAT services, corporate tax services, CFO services auditing services, and many more. Feel free to contact our exceptional team to get free consultation about your business growth.