If you’re a business owner in the United Arab Emirates (UAE) considering liquidating your company, it’s important to understand the process and requirements involved. Liquidation can be a complex and time-consuming task, but it’s often necessary when a business is no longer viable or profitable. With the help of experienced professionals, you can navigate the process smoothly and efficiently, ensuring a successful outcome for all parties involved.
In this blog, we’ll explore the ins and outs of UAE company liquidation, providing you with the information you need to make informed decisions about the future of your business.
What is Company Liquidation?
Liquidation refers to a legal process of formally ending a company’s operations, often referred to as ‘winding up’ or ‘closing down’. During liquidation, the company’s assets are sold off and the resulting funds are utilized to pay off debts, settle expenses, and distribute any remaining proceeds among the company’s shareholders. This process is a form of solvency procedure and is typically undertaken when a company is no longer able to sustain its operations or meet its financial obligations.
Types of Company Liquidation in UAE:
According to the UAE Company law, there are two distinct methods of liquidation that can be followed, each with its own set of requirements and procedures.
i) Voluntary Liquidation:
Voluntary liquidation, also known as shareholders liquidation, is initiated by the shareholders of a company. This process is triggered by various reasons such as the expiry of the fixed duration, achieving the purpose of the company formation, termination of the objects, merger with another company, continuous business losses, or inability to pay debts. Shareholders opt to dissolve the company to prevent further losses.
ii) Compulsory Liquidation:
Compulsory liquidation, also referred to as forceful liquidation, is enforced when a company violates the law or becomes insolvent, hindering its ability to continue business operations. Additionally, creditors can file complaints against the company to regulatory authorities to claim their receivables. Local authorities take action to forcefully liquidate the company and assist creditors in recovering their money.
Key factors that can contribute to the Company Liquidation in UAE
i) A lack of expertise can hinder a company’s ability to operate effectively and lead to its eventual closure, even if the investors possess significant capital and resources.
ii) Insufficient capital can render a business incapable of paying off debts, salaries, lease payments, and other expenses, making it challenging to sustain operations, regardless of the investor’s experience.
iii) Market collapse or slowdown, which may occur due to factors such as economic recession or increased competition, can contribute to a company’s liquidation. In some cases, the company may be unable to sell its products or services as much as it produces, leading to financial difficulties.
iv) Failure to renew licenses can lead to the termination of a company’s license by authorities if it remains unaddressed for more than three months.
v) Relocation may be another reason why investors choose to wind up their business, as they believe that their product or service would be better suited in other regions or countries.
Vi) Free Zone agents promote free zone licenses to several prospect business owners and sell the wrong business opportunity. In result business owners try to liquidate the company in the first year. For example, Free zone IFZA Liquidation is happening mainly people are unable to open one bank account. For Free zone DMCC Liquidation is happening because as a premium free zone DMCC license fees are in the higher side. Small business generally finds it difficult to meet the license cost and expensive rent in DMCC jurisdiction. Elevate Auditing as a DMCC Liquidator & IFZA liquidator this is our personal opinion.
UAE Company Liquidation Checklist in General
If you’re planning to liquidate your company in the UAE, there are several crucial things you must consider. Here is a checklist to help you through the process:
i) A Board Resolution must be passed to decide the last business day & to hire a Liquidator. Even if the company is one owner/one shareholder, Board Resolution to Liquidate is needed. If the company is main land the Board Resolution needs to be attested from the Notary Public.
ii) Close all active bank accounts of the company, obtain a Bank Account Closure Confirmation, and collect the Statement of Accounts for the previous financial year until the account is closed.
iii) Formally cancel all active company-sponsored visas and any employee-sponsored visas and obtain Immigration Clearance.
iv) Getting a confirmation letter from authorized independent firm as a Liquidator/Auditing firm, who will do a comprehensive check on the company’s finances and overall status. The firm may employ professionals to assist in the process.
v) Obtain clearance from any regulating authority the company falls under, such as the Federal Customs Authority for trading companies.
vi) Submit a formal cancellation of the TRN Number from the Federal Tax Authority if the company is registered with the FTA.
vii) Clear all outstanding payments and obligations to third parties, such as utilities like DU/Etisalat, DEWA, Cooling Suppliers, RTA, RERA, Empost for PO BOX, and any office facilities. Companies renting space must clear all dues with the landlord and obtain clearance.
viii) Run a 30 Days newspaper or online publication in Arabic & English (depending on the jurisdiction) stating that the company is in the process of de-registration.
ix) Sell off or transfer all existing and active assets, vehicles, and properties, and provide proof of sale to the Liquidator/Auditing firm.
x) Obtain a Confirmation Certificate of the company’s License Termination and Company De-registration from the authority where the company is registered, after ensuring that all the above points have been complied with.
Procedures of Liquidating the Limited Liability Company (LLC) in UAE
Dissolving or winding up an LLC company in the UAE involves several crucial stages, including:
i) Board of Directors Meeting: A meeting of the company’s board of directors must be held to declare the company’s liquidation and appoint a licensed liquidator. The minutes of this meeting must be notarized.
ii) Official Letter from Liquidator: The registered liquidator must provide a confirmation letter stating their acceptance of the responsibility to liquidate the company.
iii) Application for Liquidation: The liquidation form, along with the necessary fees, must be submitted to the Department of Economic Development (DED) to obtain the company’s liquidation certificate.
iv) Newspaper Advertisement: An advertisement must be placed in a local Arabic newspaper to announce the company’s dissolution.
v) Notice Period: The DED provides a grace period of 45 days to wait for any financial claims on the company from creditors or clients.
vi) Final Liquidator’s Report: The liquidator must submit a final company audit report and a letter stating that there are no claims from any third parties, clients, or creditors during the 45-day notice period.
vii) Visa Cancellation: All employees’ and partners’ visas must be cancelled, and a No Objection Certificate (NOC) must be obtained from the Ministry of Labour, Ministry of Immigration, DEWA, and Etisalat/Du.
viii) Final Liquidation Certificate: Once all the required documents have been submitted, the DED will issue a final company liquidation certificate.
Procedures of Liquidating a Free Zone Company in UAE
Elevate Auditing is one of the best Liquidator for Free zones. We have experienced as IFZA Liquidator for many Ifza company. Also, many DMCC companies were liquidated by us. As an Approved DMCC Liquidator we understand the step-by-step process that is needed by the licensing authority to close the company.
The process of deregistering a Free Zone Company in the UAE varies from zone to zone. However, the following are some of the general steps involved in company liquidation:
i) Board of Directors Meeting: A meeting of the board of directors must be held to declare the liquidation of the company and appoint a regulated liquidator. The minutes of the meeting must be attested by a Notary Public.
ii) Confirmation Letter from Liquidator: A confirmation letter from the registered liquidator accepting the responsibility to liquidate the company must be obtained.
iii) Liquidation Application: The liquidation form, along with the required fees, must be submitted to the relevant free zone authority to obtain the company liquidation certificate.
iv) Newspaper Advertisement: An advertisement must be placed in a local Arabic newspaper to announce the dissolution of the company.
v) Notice Period: The Free Zone Authority will grant a 45-day grace period to allow creditors or clients to make any financial claims against the company.
vi) Final Liquidator’s Report: The liquidator will submit the final company audit report and a letter stating that there are no claims from third parties, clients, or creditors during the 45-day advertising period.
vii) Clearance Certificates: Clearance certificates must be obtained from the Free Zone Authority (FZE/FZCo), business unit, and CLD Government section.
viii) Visa Cancellation: The visas of all employees and partners must be cancelled, and a No Objection Certificate (NOC) must be obtained from the Ministry of Labour, Ministry of Immigration, DEWA, and Etisalat/Du.
ix) Final Liquidation Certificate: After submitting all the necessary documents, the Free Zone Authority will issue a final company liquidation certificate.
Hire the best Company Liquidators in Dubai,UAE
If you’re considering company liquidation in UAE, you may have realized that the process can be complex and time-consuming. However, with Elevate’s years of experience and solid reputation in providing company liquidation services in Dubai, we can help make the process as smooth and simple as possible. Our team of experts takes full responsibility for compliance as the UAE company liquidation process unfolds. As part of our services, we prepare a comprehensive Liquidator’s report or No Liability Letter, which is audited by a professional. We also issue an Appointment of Liquidator’s Letter to inform the licensing authority, followed by a Final Liquidator’s report that verifies all possible liabilities of the company. Trust Elevate and our team of experienced liquidators in Dubai for a stress-free UAE company liquidation.
As a Company Liquidators in Dubai,UAE our projected role :
- Drafting the Board Resolution
- Publishing Advertisement in English and Arabic News Paper
- Settling with Employees
- Settling with the Debtors/suppliers
- Visa Cancellation
- Bank Account Closing
- Obtaining NOC form Dewa, NOC from Local telecom Company
- Registered Tenancy Agreement Cancellation
- De-Register with FTA
- Preparation of the Liquidator’s Report
- Submission of the final Report to the Authority to get the De-Registration Certificate
At Elevate we take care of Company Liquidation Services for all the Free Zones across UAE