Liquidation is a process where the company or the business has to come to an end when they are unable to pay the debts of their creditors. Someway liquidation is for the betterment of the company that is unable to operate as there is no point of functioning when the company is unable to bear the debts.
Following are the reasons due to which a company needs to liquidate and end its functioning:
• When the company’s debts and liability go beyond the assets.
• When the company becomes insolvent.
• When the company is unable to conduct any activity from its day of incorporation.
• When the company isn’t registered as a private or public entity.
• When the company is facing continuous losses from its business operations.
• When the company is having liquidity issues due to cash flow management.
The liquidation process is lengthy and requires lots of paperwork and permission from the authority. Here comes the role of a Liquidator who assists and guides the company to get all these works done hassle-free. A liquidator ensures that the work is done efficiently and legally. Depending upon the type of liquidation, a liquidator is either hired by the entity or is appointed by the court.
Liquidation of a company is done in two types in UAE.
1. Voluntary liquidation – this type of liquidation takes place when the owners of the company are either not interested or are unable to run the business.
2. Mandatory liquidation – this type of liquidation takes place when the UAE court orders the business to stop staying in business if they have done something against the norms.
Once the liquidator initiates the Liquidation process, the business needs to clear all their dues from creditors so that they can get a No liabilities letter. This is a legal document that is issued by the bank when the bank stating that the company has no dues from their lenders, with reference to the loan or credit card account.
After getting this letter the License Termination Process is initiated where the liquidator gets the paperwork done and gets the license of the business canceled. The termination of the license saves the business from paying any sought penalty in the future. Cancellation of a license is altogether easier for sole proprietorship as they have to just terminate their license from the Department of Economic Development (DED). This makes DED Liquidation a lesser time-taking procedure in comparison to liquidating other zones.
Limited Liability Company (LLC) is one of the most common forms of business conducted in the UAE. LLC can be formed with a minimum of 2 and a maximum of 50 shareholders. LLC is unique from another type of business as it is flexible to work anywhere in UAE and GCC. Elevate provides LLC liquidation when they are unable to function and abide by the rules of court.
The liquidation process varies depending on the three main criteria:
• The type of ownership
• The type of liquidation
• The jurisdiction of registration, whether mainland emirates or free trade zone
Elevate’s professionals have been working as a liquidator from decades in UAE. We have conducted Mainland Liquidation and LLC Liquidation for the companies who needed an end in a smooth manner. As a liquidation service provider, our professional does the work of canceling the license, seeking approval from different government authorities, and helps in attaining the liquidator’s report as soon as possible. This paperwork and especially canceling of the license is important so that the government entity knows that you are no longer in business and you are not fined with a penalty for the expiry of the license after the due date.