Company Liquidation in the UAE
Liquidation is a formal insolvency procedure (often referred to as “winding up” or “closing down” a company) in which a company is wound up; all of its assets are liquidated and the proceeds from the sale of its assets are used to pay its debts and cover its expenses, while the remainder is paid to the company’s shareholders.
When a company goes into liquidation, it ceases to conduct its business and employ people. When a company goes into liquidation, its license is canceled, its name is removed from the commercial register, and the company is considered to have ceased to exist.
Why is liquidation necessary?
There are two main reasons why it is necessary to liquidate a company in the UAE:
The original purpose of establishing the company has been fulfilled and registration is no longer required,
The purpose of the company has been fulfilled and the company is no longer needed.
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 liquidate the company and realize its assets to pay creditors.
Compulsory liquidation: if a company’s debts are not paid on time, creditors may apply to the court for the compulsory liquidation of the company to recover their claims. The courts may order the compulsory liquidation of the company and the sale of its assets to settle outstanding debts.
Is liquidation required in the UAE even if there are no outstanding debts?
Even if a company has no debts to creditors, it is highly advisable to formally Company Liquidation Services In Dubai instead of letting its license expire. When a company is formally liquidated, certain procedures must be followed.
Failure to do so may result in various penalties and may result in the company, its directors, and shareholders being blacklisted by the UAE authorities. This could affect their participation in other companies or affect their ability to establish other companies in the future.
What is the role of the liquidator?
A liquidator is a UAE registered agent or company, usually an accounting firm, appointed to act on behalf of a company and sell its assets to raise cash to settle outstanding liabilities. The liquidator may be appointed by the shareholders by resolution or may be appointed by the court in the case of involuntary liquidation. After his appointment, the liquidator first sends a formal letter of acceptance of the case. After fulfilling all his duties, he prepares a business report and the liquidator’s report, which are necessary for the completion of the liquidation procedure.
Company liquidation procedure in the UAE.
The liquidation procedure differs depending on the following three criteria:
Type of property
Type of liquidation
Registration Authority, whether on the mainland of the Emirates or in the Free Zone.
However, in general, the official registration procedure in Dubai, Abu Dhabi and other UAE is as follows:
Preparation and adoption of a resolution by the shareholders to dissolve the company. For limited liability companies (LLCs) registered in the UAE, the resolution must be notarized. If the shareholders are not UAE residents, the resolution must first be notarized and certified by the relevant UAE embassy and then ratified by the UAE Ministry of Foreign Affairs and the UAE Ministry of Justice. Companies in free zones are generally required to be notarized by a notary public.
Appointment of a liquidator and receipt of a formal letter of acceptance from the liquidator,
Filing the shareholders’ resolution, together with the required documents and fees, with the relevant licensing authority, including
A copy of the company’s trading license
A copy of the company’s articles of association
Power of attorney (if any)
Copies of Emirati passports/ID cards for all partners, owners and shareholders
Application form for deletion from the register.
After issuing a certificate of provisional liquidation, the company may publish a notice of liquidation in English and Arabic in a public newspaper (two to four notices are required, depending on the registrar).
A notice period of up to 45 days may be required (depending on the jurisdiction of registration).
The following actions may be taken during the notice period.
Cancellation of work permits and visas for all employees and partners.
Certificate of acceptance issued by the Immigration Department.
Certificate of no objection from the Ministry of Labor.
Certificate from the utility company – water, electricity, telecommunications.
Rental certificates from landlords
Certificates of approval from the Road Transport Authority (RTA) for all registered vehicles.
Customs clearance certificate issued by the Federal Customs Authority (FCA).
Letter of closure of bank account
Letter of cancellation of registration and FTA VAT clearance
After the filing deadline, the liquidator may prepare a liquidation report.
The completed report and all accompanying documents must then be submitted to the competent authority along with the required settlement fee.
The authorities will examine the submitted documents and, if approved, issue a “Permit Cancellation Certificate.”
How can Sovereign Dubai help?
The settlement process can be time-consuming and costly, as the company has to contact several external parties/authorities to get everything resolved in a timely manner. Missing any step or document can cause unnecessary delays and complications. Sovereign offers settlement services for all companies in the UAE – limited liability companies, free zone companies, and offshore companies – from full settlement to assist with part or all of the process depending on the client’s needs.