Liquidation of a company in the UAE
Liquidation is a formal insolvency proceeding whereby a company is dissolved (often also referred to as “winding up” or “dissolution” of a company); all its assets are liquidated and the proceeds from the sale of assets are used to pay debts and expenses, with any balance being transferred to the company’s shareholders.
Once the Company Liquidation Services In Dubai, it ceases to do business and to employ people. In the case of liquidation, the company’s business license is revoked, its name is deleted from the commercial register and the entity is considered to have ceased to exist.
Why should it go into liquidation?
There are two main reasons why a company in the UAE needs to go into liquidation.
The original purpose for which the company was incorporated has been fulfilled and the entity is no longer needed.
The company is considered insolvent.
Types of liquidation
Voluntary liquidation: the shareholders of a company may decide to liquidate a solvent company or the directors of an insolvent company may decide to cease trading and liquidate the assets to pay creditors.
Compulsory liquidation. If a company’s debts are not paid promptly, creditors may ask the court to liquidate the company in order to recover the money owed to them. The court may order the dissolution of the company and the sale of its assets to pay the outstanding debt.
Is it necessary to liquidate in the UAE even if there are no outstanding debts?
It is strongly recommended that a company be formally liquidated even if it has no debts owed to creditors, rather than simply letting the business license lapse. There are a number of procedures that must be followed when formally liquidating a company. Ignoring these procedures can lead to various penalties and can also result in the company, its directors and shareholders being “blacklisted” by the UAE authorities. This may affect its shareholding in other companies or its ability to set up another company in the future.
What is the role of the liquidator?
A liquidator is a UAE-registered agent or company, usually an accounting or auditing firm, appointed to sell the company’s assets on behalf of the company in order to raise funds to pay any outstanding debts. The liquidator may be appointed by a resolution of the shareholders or by the court in the case of compulsory liquidation. Upon appointment, the liquidator will issue a formal letter of acceptance at an early stage. Once he has completed all his duties, he will prepare a statement of accounts and a liquidator’s report, which are necessary to complete the liquidation process.
The liquidation process in the UAE
The liquidation process varies according to the following three criteria.
Type of property
Type of liquidation
Authority of registration, either the UAE mainland or a free zone.
However, in general, the formal liquidation procedures in Dubai, Abu Dhabi and other parts of the UAE are as follows.
Preparation and approval by the shareholders of a resolution to wind up the company. In the case of limited liability companies (LLCs) registered in the UAE, the resolution must be countersigned by a notary. If the shareholders are not located in the UAE, the resolution must first be notarized at the relevant UAE Embassy and then at the UAE Ministry of Foreign Affairs and the UAE Ministry of Justice. In the case of free zone companies, notarization is usually mandatory.
Appointment of a liquidator and receipt of a formal letter of acceptance from the liquidator.
Submission of the shareholders’ resolution together with the required documents and fees to the licensing authority, including
A copy of the company’s business license
A copy of the company’s memorandum of incorporation
Power of attorney (if applicable)
Copies of passports/identity cards of all partners, owners, and shareholders.
Application form for cancellation of registration.
Once a provisional certificate of dissolution is issued, you may proceed to publish a notice of dissolution in an English or Arabic public newspaper (two to four notices may be required, depending on the registration authority).
A notice period of up to 45 days may be required (depending on the jurisdiction of registration) 06;
During the notice period, the following actions may be taken
Cancellation of work permits and visas for all employees and partners. 06 During the notice period, the following actions may be taken
Letter of authorization from the Immigration Department
Letter of authorization from the Ministry of Labor
Letter of approval from the utility company (water, electricity, telecommunications)
Letter of approval from the tenant (landlord)
Letter of approval from the Road Transport Authority (RTA) for each registered vehicle
Letter from the Federal Customs Administration (FCA) regarding customs clearance
Letter of bank account cancellation
VAT cancellation letter and VAT clearing letter from FTA
The liquidator may prepare a liquidation report after the end of the reporting period.
The completed report and all supporting documents must be sent to the competent authorities along with the required objection fee.
The authority will consider the application and, if accepted, will issue a “Certificate of License Revocation”.
How can Sovereign Dubai help me?
The liquidation process can be time-consuming and costly, as companies need to contact many external parties/authorities to complete everything in a timely manner. Omitting any step or document can lead to unnecessary delays and complications. Sovereign provides liquidation services for all entities in the UAE (LLCs, free zone companies, and offshore companies) according to your needs, from full liquidation to assistance with parts of the process.
