Owning and running a company is not an easy feat. Quite often, business owners meet with unexpected obstacles or financial obligations that lead to winding up of the company. Company shutdown or liquidation is a fairly complex process that requires some expert assistance from financial advisors and business consultants. Depending upon the reason for the shutdown the remaining assets are either used to pay off the debts or divided among shareholders as per their claim.
Companies liquidate due to ‘insolvency’, which is a situation where the business is unable to produce necessary payments but has to pay off debts through a court motion. Sometimes, companies also go into voluntary liquidation, where the assets are ‘solvent’. In the case, the liquidated assets are used to pay the shareholders outside of the court. In any case, a financial advisor or ‘liquidator’ will help the company go through the process by remaining impartial and making sure the creditors are paid according to the standing of their claims.
In the UAE, company liquidation follows a series of steps, at the end of which the company will cease to exist. In this blog, we will discuss the steps taken for the liquidation of a company in the UAE.
Voluntary Liquidation/ Company Cancellation in the UAE
To liquidate a company, the firm as to pass a resolution for closing the company during the shareholder’s meeting. A financial advisor or ‘liquidator’ is also appointed to oversee the proceedings, whose name and address are also entered in the resolution. For an LLC company, after the resolution is passed by the board, a public notary has to attest the same. On the other hand, Free Zones companies don’t need a notary attestation.
If the company shareholders are unavailable in the country during the dissolution process, the resolution is notarised and attested for the UAE embassy of the company’s home country. The notarized resolution is again attested by the Ministry of Foreign Affairs and Ministry of Justice in UAE for its legal validation.
For the company liquidation, the firm has to submit several legal documents. These include the company license copy, shareholders resolution, their passport and Emirates ID copies, a memorandum of association copy including all the changes it had over the years and a de-registration application form.
On submitting the above documents, payment is also done to the concerning economic department authority to obtain a liquidation certificate. This officially marks the company’s winding up processes.
Following the issue of the certificate, the company must go ahead with notice of liquidation advertisement in the local newspapers. At most, companies get around 45 days of the notice period to get various dues clearances. Before the notice period ends, the company will have to receive clearances from the labour, immigration, electricity and water departments, telecom authority, a clearance letter from the landlord and bank account closure letter.
To finalize the company liquidation, the above-mentioned documents have to be submitted to the reviewing authority along with the liquidation report and copy of newspaper advertisement along with the final cancellation payment. On submission, the final “License Cancellation Certificate” will be issued, thereby completing the liquidation procedure.
Consult with our financial advisors today for more information on dissolving your company in the UAE.