The liquidation of a company in Sharjah is a process that is regulated by UAE laws to protect the interests of the stakeholders. It is important for business owners to fully comprehend the process of liquidation in UAE to ensure compliance with the relevant laws.
This article explains the process of company liquidation in Sharjah, the procedures involved, the legal framework that applies, and the required documents.
Also read: Trade License Cancellation in Sharjah
What is Company Liquidation?
Company liquidation is the process of closing a business by paying off its debts, distributing the remaining assets, and canceling its trade license. It is important to properly liquidate a company in the UAE in compliance with the relevant laws to avoid incurring penalties and to be in compliance with regulatory authorities.
Liquidation procedures in the UAE are broadly divided into two main categories.
- Voluntary Liquidation: In this type of liquidation the company is solvent and the shareholders or directors have decided to close down the business.
- Compulsory Liquidation: In this type, a court issues compulsory liquidation orders when a company faces insolvency which prevents it from paying its financial obligations.
Reasons for Liquidation of a Company
A company may choose to liquidate its assets for several reasons including:
- Financial difficulties: Losses that are recurring and the inability to meet financial obligations.
- Attainment of business objectives: The main reason for which the company was established has been achieved.
- Shareholder disputes: Unresolvable conflicts among the shareholders or partners.
- Strategic restructuring: Liquidation may be part of a larger corporate restructuring plan, such as mergers, acquisitions, or organizational changes.
Legal Framework Governing Liquidation in the UAE
The liquidation process in Sharjah is mainly regulated by the UAE’s Federal Decree-Law No. 32 of 2021 on Commercial Companies. This law outlines the procedures, duties, and legal requirements for the dissolution of companies in the UAE.
Step-by-Step Process and Requirements for Company Liquidation in Sharjah
The company liquidation process has two main stages. Each one includes clearly defined steps and requirements. The process involves several key steps:
Stage 1: Initiating Liquidation
The first stage requires official preparation and declaration of the liquidation process. Here’s what you need to do:
- Prepare Minutes of the General Assembly: The Company must draft and notarize its general assembly minutes to establish its liquidation status and appoint a registered liquidator. The document needs to validate both the company dissolution and the selection of a registered liquidator to manage the process.
- Obtain Liquidator’s Acceptance Letter: A licensed liquidator must submit an official acceptance letter to take charge of the liquidation process.
- Apply for Cancellation: The Company needs to submit its cancellation application through the Sharjah Economic Development Department (SEDD) or authorized channels to start the liquidation process.
- Receive Liquidation Certificate: The Sharjah Economic Development Department (SEDD) will grant a liquidation certificate after reviewing the application which serves as official proof of process commencement.
- Publish a Notice of Liquidation: The company must publish its liquidation notice through two newspapers that use Arabic and English languages. The publication date gives creditors a 45-day window to present their claims.
Stage 2: Completing Liquidation
During the second phase, the 45-day grace period ends which allows the completion of remaining formalities until the company receives its deregistration approval.
Submit Declaration Letter: The liquidator and company partners must prepare a declaration letter which they submit to SEDD to confirm that no objections arose throughout the grace period.
Obtain Approvals from Government Bodies: Secure necessary approvals from relevant government authorities to proceed with canceling the company’s license. These include:
- Ministry of Human Resources and Emiratisation
- Utility providers
- Immigration authorities.
Cancel Employee Sponsorships and Visas:
- The firm card maintained by the Ministry of Human Resources and Emiratisation requires cancellation.
- The company must terminate all foreign partner visas through the General Directorate of Residency & Foreigners Affairs.
Submit Required Documents: Submit all necessary documents to SEDD for final approval. This includes clearance certificates and the liquidator’s report.
Pay Fees and Receive Deregistration Certificate: The assessment by SEDD will determine the fees that must be paid to obtain the deregistration certificate that marks the end of company liquidation.
Also read: Accounting and Auditing in Sharjah
Important Considerations
- Legal Compliance: Legal procedures should be followed to prevent future liabilities or legal complications.
- Timelines: The entire liquidation process can take several months, depending on the complexity of the company’s operations and the promptness in fulfilling all requirements.
- Professional Assistance: Experienced and licensed liquidators help to ensure the conducting of a seamless liquidation process in compliance with all the relevant laws & requirements.
How Farahat & Co. Can Assist You
At Farahat & Co., we offer complete company liquidation support. Our licensed liquidator assists with:
- Preparing and submitting final audit and financial statements.
- Drafting and submission of liquidation board resolutions and notices.
- Communicating with the SEDD Chamber of Commerce and MOHRE government authorities.
- Resolving all outstanding financial obligations and worker compensation claims.
- Cancellation of trade licenses together with its visas and bank accounts.
- Fulfilling all the legal and regulatory requirements in compliance with UAE laws and regulations.
To ensure conducting a seamless liquidation procedure in compliance with the relevant laws, contact us today and we shall be happy to assist you.
