Company liquidation is the legal process of winding up a company’s affairs, distributing its assets, and ultimately dissolving the business entity. Company liquidation process in the UAE can be initiated for various reasons, such as financial difficulties, inability to pay debts, expiry of the company’s duration, a deliberate choice by the shareholders to close the business, or a legal obligation in some situations.

Whatever the cause, it is important to follow the legal rules and guidelines that apply to company liquidation in Dubai.

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This article aims to provide a detailed overview of the company liquidation process in Dubai, outlining the steps involved and offering valuable insights for businesses navigating this challenging phase.

Types of Company Liquidation in Dubai, UAE

Depending on the legal form and location of the company, there are different types of Company Liquidation in Dubai.

The two main kinds of company liquidation in Dubai are:

Voluntary Company Liquidation: This is when the shareholders of a company decide to liquidate the company for various reasons, such as fulfilling the original purpose of setting up the company or facing insolvency or financial difficulties. The shareholders must appoint a liquidator and follow the procedures for canceling the business license and publishing a notice of liquidation in the newspapers.
Compulsory Company Liquidation: This is when the creditors of a company request the courts to liquidate the company to recover their debts. The courts may order the company to liquidate and sell its assets if the company fails to pay its debts on time or commits a serious offense. The court will appoint a liquidator and oversee the liquidation process.

The type of liquidation also depends on whether the company is registered in the mainland or a free zone, as different rules and procedures apply to each jurisdiction.

Here Are the Company Liquidation Process in Dubai, UAE

The company liquidation process in Dubai typically involves several key steps, which must be followed diligently:

Step 1. Board Resolution and Shareholder Approval

The first step is to pass a board resolution recommending liquidation and obtain shareholder approval through a general assembly meeting. The decision must be documented and recorded in the official minutes of the meeting.

The resolution must also specify the reason for liquidation, the name and details of the appointed liquidator, and the distribution of assets among shareholders.

The resolution must be attested by a notary public or a competent authority, depending on the legal form and location of the company.

Step 2. Appointment of a Liquidator

The next step is to appoint a liquidator to oversee the liquidation process. The liquidator can be an individual or a specialized company registered with the relevant authorities in Dubai. The liquidator’s role is to safeguard the interests of all stakeholders and ensure a fair distribution of assets.

The liquidator must also prepare a final audit report and a statement of affairs for the company.

Step 3. Notification of the Creditors of the Liquidation

Upon its dissolution, the Company shall immediately pay all its debts. The liquidator shall send registered letters with acknowledgment of receipt to all the creditors, informing them of the start of the liquidation and asking them to submit their claims.

The notice shall also be published in two local daily newspapers, one of which shall be in Arabic.

The notice shall give the creditors at least (30) thirty days from the date of the notice to present their claims.

Step 4. Visa Cancellation

The fourth step is to cancel all visas and work permits issued under the company’s sponsorship. This includes visas for employees, partners, directors, and dependents. The visa cancellation process must be done through the Ministry of Human Resources and Emiratisation (MOHRE) and the General Directorate of Residency and Foreigners Affairs (GDRFA).

The visa holders must also settle any outstanding fines or fees before leaving the country.

Step 5. License Cancellation

The final step is to cancel the company’s trade license and all related permits associated with it. This must be done through the Department of Economic Development (DED) or the relevant free zone authority (if applicable).

The license cancellation process requires obtaining no objection certificates (NOCs) from various government entities, such as:

The Federal Tax Authority (FTA)
The Dubai Electricity and Water Authority (DEWA)
The Dubai Municipality
The Leasing Entity
The Bank

Once all NOCs are obtained, the license cancellation certificate will be issued by DED or the free zone authority.

FAQs

Is Liquidation the Only Option for Closing Down a Business in the UAE?

No, there are other options like mergers, acquisitions, or selling the business. However, if you decide to cease operations, liquidation is the formal process to follow.

How Long Does the Liquidation Process Usually Take?

The timeline can vary depending on factors such as the complexity of the company’s financial situation and the efficiency of the liquidation process. On average, it can take several months to complete.

What Happens to Employees During the Liquidation Process?

Employee rights are protected during liquidation. Unpaid wages, end-of-service benefits, and other dues must be settled as part of the process.

Can a Company Under Compulsory Liquidation Continue Operations?

In most cases, the company ceases operations once the court orders compulsory liquidation. The focus shifts to settling debts and distributing assets.

Can I Handle Company Liquidation Without Professional Assistance?

While it’s possible, the legal and procedural complexities make it highly advisable to seek professional assistance. Experts can ensure a smoother and more compliant process.

How Farahat & Co Can Help You – An Expert Liquidator in UAE

Farahat & Co. is a reputable and licensed firm that provides company liquidation services in Dubai for all types of entities, including LLCs, free zone companies, and offshore companies.

They can assist you with the following aspects of company liquidation in Dubai:

Preparing and submitting the required documents, such as the board resolution, the license cancellation, and the visa cancellation.
Appointing a qualified and experienced liquidator to oversee the process and prepare the liquidator’s report.
Notifying the relevant authorities and stakeholders of the decision to liquidate.
Settling all outstanding debts, taxes, and liabilities with the creditors and shareholders.
Distributing the remaining assets among the shareholders and obtaining the final liquidation certificate from the authorities.

Farahat & Co. can simplify all legal procedures and help you with the company liquidation in Dubai in a timely and cost-effective manner. They have a team of experts who can handle any challenges or disputes that may arise during the liquidation process.

They can also advise you on the best course of action for your business situation and help you comply with the legal requirements and regulations.

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If you are looking for a reliable and professional company liquidator in Dubai, you can contact Farahat & Co.