Liquidation is the formal process of closing (or ‘winding down’) a company and selling its assets. The proceeds then go towards settling the company’s debts. The shareholders take the remaining money.
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What are the different types of Liquidation?
1. Voluntary liquidation
Happens when the Shareholders decide as a collective to liquidate their solvent company. It can also happen when the directors of a struggling company choose liquidate their insolvent company in order to pay off creditors.
2. Compulsory Liquidation
If a company amasses debt due to unpaid bills the creditors can request that the courts liquidate the company to collect their money. The court can approve the request to liquidate the company and the money made from selling the company assets goes towards settling the outstanding debt. Compulsory company Liquidation in Dubai can also happen when a director or shareholder of the company itself petitions to have the company closed.
key steps in the Liquidation process
Here are the key steps in the company Liquidation process. Some of the process may differ based on the Jurisdiction but the core elements remain the same.
Resolution and appointment of a Liquidator
The company’s shareholders must pass a shareholder’s resolution where they openly agree to terminate the company’s license. A public notary must acknowledge this for it to be valid. In cases where the shareholders is abroad their respective embassy should attest the UAE notarization. Next, the UAE Ministry of Foreign Affairs and Ministry of Justice need to attest the documents. The shareholders’ resolution, processing fee and copies of the following documents need to be submitted to the relevant licensing authority:
- Trade License copy.
- The Memorandum of Association copy.
- Power of Attorney if needed.
- Passport and Emirates ID copies of all partners, owners and shareholders.
- De-registration application form.
A company Liquidator then sells the company’s moveable and immovable assets in order to settle outstanding debts. Alternatively, the shareholders can make a resolution to divide the money between themselves.
Company Liquidation Certificate
The Department of Economic Development(DED) will issue the appointed Liquidator a Liquidation Certificate after they receive all the needed documents. This allows for the Liquidation process to proceed.
With provisional liquidation certificate issued the company can proceed to publish a notice of liquidation in a public newspaper in both English and Arabic. These publications inform creditors to submit any claims or objections they have against the company during this time. The notice period varies between emirates.
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The following tasks are ideal for the notice period:
- Cancelling all employee visas – Cancel all residence visas in this time. This gives time for the cancelled workers to either exit the country or find sponsorship under another company.
- Terminate Corporate Bank Accounts – Close Active UAE bank accounts. A Statement for their last financial year prepared for the Liquidators Report. As standard you will also need bank closure documentation from the bank as proof.
- Clearance from all the Regulatory Authorities relevant to your company.
- Clearance from all Third Parties – Those that are responsible for all your utility services like Etisalat, Dewa, office rentals and so on.
- Company Assets – Sell or transfer the company assets. Show proof of sale or transfer to the auditing firm doing the Liquidator`s report.
Read More: How to Liquidate a Company in DIFC ?
Completion of the Notice period.
- Once the notice period is over the liquidator can prepare the Liquidation Report.
- The documents were submitted to the company’s registrar.
- The registrar will review all information and if all is in order issue the License Cancellation Certificate / Certificate of De-registration.
No matter what type of liquidation procedure in UAE is being opted for, the main thing is that this Company must add the term in liquidation to its trade name. Call Farahat & Co. for further detail.