Company Liquidation in World Trade Centre (DWTC) Dubai is a formal procedure that ends the legal existence of a company in the DWTC free zone. The procedure is regulated by UAE Federal Law No. 2 of 2015 and DWTC-specific regulations.
This article thoroughly explains the process of company liquidation in Dubai World Trade Center, the prerequisites required to meet, and the relevant steps to avoid incurring penalties and ensure compliance.
Legal Framework and Regulatory Authorities
In DWTC, the company liquidation process is guided by the UAE Federal laws and the directives of the DWTC Free Zone Authority. The Dubai Department of Economic Development (DED) is in charge of the deregistration of mainland entities, but free zone companies are governed by the DWTC Authority.
In instances of compulsory liquidation, the UAE courts intervene, notably during the cases of creditors who bring actions for their debts exceeding the statutory minimum.
Failure to comply with the laid-down liquidation procedures may attract harsh penalties such as daily fines and travel restrictions imposed on shareholders.
Shareholders’ Voluntary Liquidation (SVL)
- This type of liquidation process is adopted by solvent companies that have shareholders who would like to wind down the business.
- The process of this section requires a board resolution with at least a 65% shareholder vote.
- It is obligatory to appoint a liquidator who is approved by DED.
- All outstanding debts must be cleared up within 45 days of the public announcement.
Creditors’ Voluntary Liquidation (CVL)
- This type of liquidation is adopted by insolvent companies lacking the funds to meet their liabilities.
- The directors have to officially declare the insolvency and have a creditors’ meeting.
- The creditors representing at least 75% of the total debt must accept the liquidation plan.
- Liquidation audits are submitted to DED.
Compulsory Liquidation
This is the procedure established by the courts, most commonly in cases where creditors petition for debts unpaid totaling more than 100,000 AED or in scenarios where audits have not been submitted as required by the Ministry of Economy.
A liquidator is named by the courts; it usually takes about 6 to 12 months to finish the procedure.
Also read: Voluntary Liquidation in UAE
Process for Company Liquidation in the Dubai World Trade Centre (DWTC)
Pre-Liquidation Preparation:
Board Resolution
The shareholders pass a notarized resolution to liquidate the company and at the same time appoint a liquidator.
The resolution must cite the reason for liquidation and also mention the signed liquidator.
Document Compilation
Collect the original trade license (if it has expired, renew it).
Draft any amendments for the MoA (if needed).
Obtain Emirates ID and passport copies of each shareholder.
Financial Assessment
Arrange a third-party financial audit to find out the solvency status of the company.
The directors of SVL must sign the declaration of solvency that confirms the company can pay its debts within a year.
Official Notification:
Publication of Liquidation Notice
It is necessary to publish a liquidation notice in two newspapers (one in Arabic and one in English), like Al Bayan and Gulf News.
This action commences 45 days after which the creditors can submit their claims.
Authority Submissions
The liquidation intent needs to be filed with the DWTC Free Zone Authority and DED.
The required processing fee (about 2,500 AED) must be paid.
Debt Settlement and Asset Distribution:
Liquidator’s Role
The liquidator is responsible for validating creditor claims and orchestrating the auction or sale of assets.
Secured creditors are the first to be repaid; the leftover amount goes to shareholders.
Employee dues, visa cancellations, and end-of-service benefits must be paid by the UAE labor law.
Final Audit
The final audited financial statements should be submitted to the DED.
Deregistration:
License Cancellation
To deregister the company, it is key to first settle all utility bills (DEWA, telecom) and present bank closure certificates.
Cancel all visas that are linked to the company.
You are to get a No Objection Certificate (NOC) from the DWTC Free Zone Authority.
Removal from Commercial Registry
After auditing the company, the DWTC gives a closure certificate within 10 working days, officially closing the company.
Requirements of Company Liquidation in Dubai World Trade Centre (DWTC)
- Legal Documentation: Board resolution, the notarized appointment of a liquidator, trade license, MOA amendments, and shareholder IDs.
- Financial Audit: Third-party audit confirming solvency or insolvency.
- Public Notification: Newspaper publication and 45-day creditor claim period.
- Debt Settlement: Full settlement of all debts, employee dues, and government liabilities.
- Asset Distribution: Sale or auction of company assets, with proceeds distributed according to legal priorities.
- Deregistration: Cancellation of trade licenses, visas, utilities, and removal from the commercial registry.
Financial and Timeline Considerations
- Simple Cases: 60–90 days (debt-free entities).
- Complex Cases: 6–8 months (insolvency or disputed assets).
Common Challenges and Solutions
- Obscure Expenditures: Obtain a thorough list of fees and incorporate a 20% reserve in the budget to sidestep unforeseen costs.
- Bureaucratic Conduct: Engage conscious agents. Increase direct communication to fast-track the process with the authority.
- Asset Valuation Divergences: Engage DED-certified valuers and à jour inventory keepers.
- Visa Cancellation Delays: Employ VIP portals and think of disbursing fees for expediting if needed.
Post-Liquidation Routines
- As mandated by the UAE Federal Law No. 7 of 2017, it is obligatory to maintain all accounting documentation for seven years.
- Issue outstanding VAT payments in 20 days to avoid penalties.
- Monitor potential shareholder liabilities for three years post-liquidation.
The process of company liquidation in Dubai World Trade Center requires careful planning, adherence to legal and regulatory requirements, and timely action. By following the outlined steps and ensuring all requirements are met, businesses can avoid penalties and ensure a smooth exit from the DWTC-free zone.
Early preparation, professional guidance, and clear communication with stakeholders are essential for a successful liquidation process in the Dubai World Trade Centre.
Contact us today, and we shall be glad to assist you.
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