Company liquidation in the UAE refers to the systematic process undertaken to close down a business. Once liquidated, the company can no longer conduct business operations and employ people. There can be several reasons behind the liquidation of a business ranging from decreased revenue, high levels of debt, legal disputes, fraud, loss due to natural disasters, and so on. It is necessary to note that this process can vary for companies based on their legal structure, the jurisdiction of registration, and the reason for liquidation. Through this blog, we will explore the procedure that is generally undertaken for liquidating companies in Dubai, and across the UAE.
Prerequisites for Company Liquidation in the UAE
Here are the necessary requirements that precede the process of liquidation:
Passing of a Board Resolution
A board resolution must be prepared through which the shareholders can express their consent in favor of the liquidation. This document must also outline the reasons leading to the liquidation.
Conducting Financial Audit
A financial audit must be conducted to ensure the settling of financial liabilities of the company.
Settlement with Utility Service Providers
All electricity, telephone, and water supply connections must be closed and all payments must be settled with the relevant authorities.
Settlement of Debts/Expenses
Any pending debts from creditors must be cleared before proceeding with the company liquidation.
Process for Company Liquidation in the UAE
Here are the general requirements that make up the process to liquidate a company in Dubai, and across the UAE:
Appointing a Liquidator
A liquidator is usually appointed to oversee the complete process. In case of voluntary liquidation, the shareholders may appoint the liquidator and in case of compulsory liquidation, the court may assign one. It is key to note that appointing a liquidator may not always be necessary. Generally, free zone companies do not require the appointment of a liquidator.
Notice of Liquidation
A formal notice must be issued through a newspaper notifying about the company’sclosure. This notice must be given through English as well as Arabic newspapers in the UAE.
Asset Liquidation
Any assets owned by the company must be duly liquidated, and if necessary can be used to pay off the outstanding debts.
Employee Settlements
The employees must be paid their dues including salaries, gratuities, and other benefits. The final settlement process must be completed in line with the UAE labor laws. The visa cancellation for the employees can then be initiated.
Visa Cancellation
All visas obtained through the company must be canceled. These can be visas for the shareholders as well as the employees.
Cancellation of Company Establishment Card
The company’s establishment card must be canceled before the trade license can be canceled.
Company Bank Account(s) Closure
Any bank account(s) opened in the name of the company must be closed and the closure letter must be obtained before the company can be liquidated.
Cancellation of Permits from Government Departments
If you have obtained any external approvals from any of the UAE’s government bodies, then these need to be canceled as well.
Tax De-registration
If the company has completed corporate tax registration or Value Added Tax (VAT) registration, it is necessary to de-register. This process must be completed with the UAE’s Federal Tax Authority (FTA) and the de-registration and clearance letters must be obtained.
Obtaining Clearance Letters from Relevant Authorities
It is necessary to secure clearance letters from various government authorities and service providers. This can include authorities such as the immigration and labor departments, transport authorities, banks, landlords, and so on.
Liquidation Report
The liquidation report will be prepared and submitted to the license issuing authority along with the required documentation. The authority will then issue the ‘License Cancellation Certificate’ upon approval of the liquidation request.
Court Approval (If required)
In certain cases, especially those involving compulsory liquidations, it may be necessary to seek the court’s approval for the liquidation.
Cancellation of Trade License
With this step, your company will be officially liquidated. Once complete, the company will cease to conduct business operations.
As mentioned earlier, the overall process of liquidating a company can vary depending on a number of factors. Also, the charges for visa cancellations as well as the total cost of liquidation vary from one company to another.
InZone is a corporate service provider specializing in setting up free zone, mainland, and offshore companies in the UAE. Besides the formation assistance, InZone provides a complete suite of services to cater to the ongoing needs of businesses in the UAE.
