Voluntary liquidation is a self-imposed wind up of a company that has been approved by shareholders. Such a decision will happen once a company’s owner decides that the company has no reason to continue operating. It is not a court order (not compulsory). The aim of a voluntary liquidation is to conclude the company’s operations, wind up its financial affairs, and dismantle its corporate structure in a formal manner while paying back the creditors according to their assigned priority.
What causes a company to go into liquidation?
- Poor functioning of business: when a company does not operate properly the shareholders may decide to voluntary wind up the company.
- Restructuring and transferring assets to another company: this may be in exchange for an ownership or equity stake in the acquiring company.
- Limited period: Voluntary liquidations may also be approved because the liquidating company was only meant to exist for a limited amount of time or for a specific purpose that has been fulfilled.
- The exit of key member: In addition, voluntary liquidation may happen if a key member of an organization leaves the company and the shareholders decide not to continue operations.
Find more info: Liquidation Process for A Company with No Assets
Process of voluntary liquidation in UAE
- Determine the type of liquidation
- Members voluntary liquidation
A Members Voluntary liquidation is a process that enables shareholders to appoint a Liquidator in order to formally close down a solvent company. A can only take place if the directors of the company make a formal declaration for voluntary liquidation.
- Creditors voluntary liquidation
If the company turns to be insolvent the liquidator will call a meeting of creditors and the liquidation becomes creditors voluntary liquidation. A Creditors’ Voluntary Liquidation is the liquidation of a company that cannot pay its debts as they fall due. The process is initiated by the directors of a company where the company’s liabilities exceed its assets and is insolvent. When the company directors realize the company does not have a reasonable prospect of survival, they are obliged by the Company’s Act to put the company into liquidation. The company can nominate an authorized person as a liquidator. It must call a meeting of creditors to discuss the financial details of the company.
- Directors of the company to agree for voluntary liquidation
The next step is the directors of the Company need to agree that the Company is suitable for a liquidation.
- Declaration of solvency
The directors have to file the declaration of solvency with the registrar.
- Special resolution
Directors have declared the company solvent, so the managing shareholder of the Company will pass a Special Resolution for liquidation.
- Liquidators consent
The Liquidator will sign a consent form (to be filed with the Registrar of Companies) notifying the Registrar of the appointment.
- Settlement of claims
Any invoices and claims submitted to a Liquidator will be reviewed for authenticity. The liquidator will work with the Company’s various service providers to determine whether the submitted claim is genuine.
- Final meeting:
The liquidator will conduct a final meeting and present all necessary documents and confirmation for liquidation.
Director’s duties in Voluntary Liquidation
In the voluntary declaration the company’s directors must provide:
- The information about companies’ affairs to the liquidator and attend interviews with the liquidator as and when required.
- Look after and hand over the company assets with all records, bank statement and other important papers relating to assets and liabilities
Farahat and co have a team of leading company liquidators in the country. We can guide you through all the steps of voluntary liquidation. Our specialized team deeply investigates each case and executes the voluntary Liquidation process smoothly. For further consultation, contact us