In the Dubai Multi Commodities Centre Authority (DMCC), company liquidation is the procedure of closing down a company and disposing of its assets. The liquidation process in DMCC is governed by the Law No. (3) of 2020 issued in the Emirate of Dubai & DMCC Company Regulations 2020, which replaced the previous regulations of 2003.
Company liquidation in DMCC requires careful planning and execution. Liquidation is the process of winding up the company. The process makes sure that all the legal and financial aspects are in order before the company is dissolved legally.
Types of Company Liquidation in DMCC
There are mainly four types of company liquidation in DMCC:
1. Solvent Winding-Up
This applies if the company can pay its liabilities. The shareholders initiate the process. Within solvent winding up, there are provisions for companies with a very simple financial structure to expedite the procedures and, therefore, to complete the process quickly.
2. Insolvent Winding-Up
This is the situation when the company is unable to pay its debts. This may be voluntarily done by the company or compulsorily wound up by an order of the court. In this process, the creditors have a great role to play.
3. Summary Winding-Up
Summary winding-up of a DMCC company is possible if:
- The Company has no assets and no liabilities; or
- The Company has assets and no liabilities; and
- The affairs of the Company can be finally winded up within six months of the commencement of the summary winding-up.
4. Involuntary winding-Up
In involuntary dissolution, a Company may be winded up by the Court if the Court makes such an order following a petition to wind up a Company by the Registrar. The Registrar may (but is not obliged to) present a petition to the Court for a Company to be winded up.
It is also essential to note that even when a company is solvent, the board of the company can resolve its winding up. It is variously termed “Voluntary Liquidation” or “Liquidation by Resolution of the Board.”
DMCC Company Liquidation Procedures and General Provisions
The DMCC liquidation process is carried out under Section 21 of DMCCA Company Regulations – 2024 [Amended]. This includes key steps and details involved in it.
1. Notification of Liquidation
Every document on or in which the name of the Company appears, issued by or on behalf of the Company, shall contain a statement that the Company is undergoing liquidation. This ensures transparency and that stakeholders are especially notified.
2. Appointment of a Liquidator
- Qualifications: The liquidator shall be an individual who is a member in good standing of a recognized professional body and has such additional qualifications as may be prescribed by the Registrar.
- Appointment: An appointment made in contravention of any of the above qualifications shall be void. A liquidator who ceases to meet the qualifications shall vacate the office.
- Guidelines: Regulations may be made by the Registrar regarding qualifications, experience, fitness, and propriety for liquidators.
3. Powers of the Liquidator
The liquidator exercises the powers necessary to manage and oversee the liquidation process.
These include:
- Settle a list of contributors and amend the register of shareholders, if required.
- Collect the company’s property and apply it to discharge liabilities.
- Call on contributors for payments of money that are due to the company.
- Modify the rights of contributors and distribute surplus, if any, among the entitled parties.
4. Resignation or Removal of the Liquidator
- Resignation: A liquidator may resign because of changes in his or her circumstances that make it impossible to perform the duties.
- Removal: The Court or the company in a solvent winding up or the creditors in an insolvent winding up can remove a liquidator.
- Notification: The liquidator has to inform the Registrar and the creditors within 10 business days of resignation or removal.
5. Duty to Cooperate with the Liquidator
Company officials must comply with the reasonable requests and directions of the liquidator and must not hinder or obstruct the work of the liquidator.
6. General Provisions on Voting
- Majority Vote: Unless otherwise provided, the meetings of creditors, the company, and the Liquidation Committee are taken by a simple majority.
- Electronic Voting: The meetings of creditors can be arranged by an accredited courier or by electronic communication, except for the meetings for which their appearance is required.
7. Proofs of Debt in Liquidation
- Submission: The creditors are to submit a proof of debt in the prescribed form to the liquidator.
- Contents: The proof of debt should contain the details of the creditor, the amount claimed in total, particulars of the debt owed, securities held, and the reserved title, if any.
- Documentation: The liquidator can demand further documents to support the claim.
8. Admission and Rejection of Proofs of Debt
- The proofs of debt are to be admitted for a dividend either for the whole amount of the Creditor or for any part of that amount.
- If the liquidator rejects a proof of debt in whole or in part, he shall prepare a written stating reasons for the same and provide the same to the Creditor.
9. Withdrawal or Variation of Proof of Debt
Creditors can withdraw or vary a proof of debt by agreement with the liquidator.
10. Intention to Declare and Distribute Dividend
- Notice: The liquidator is supposed to give notice to all the known creditors about his intention of declaring a dividend and invite proof against the debt owed.
- Publication: The notice shall be published as the Registrar may direct and may be advertised in any other manner.
- Acceptance: Proofs of debt received after the notice period are accepted at the discretion of the liquidator.
11. Contents of Notice
The notice must state:
- Proofs of debt should be lodged not later than fifteen business days from the date of the notice.
- The intent is to distribute the same within two months.
- Whether the dividend is interim or final.
- Where proofs of debt will be delivered.
12. General Priority of Expenses
The winding-up expenses are paid out of the available assets of the company in the following order:
- Liquidator’s expenses and costs.
- Liquidator’s remuneration.
- Amounts payable to secured creditors.
- Unpaid employee salaries.
- Amounts payable to DMCCA or other government authorities.
- General unsecured creditors.
13. Distribution of the Company’s Property
- Liabilities: The Company’s property is realized and applied towards liabilities equally.
- Shareholders: Remaining property to be distributed among shareholders by rights and interests and in the absence of any provisions in the Articles or applicable law.
14. Reference of Questions to Court
The liquidator or any contributory or creditor may apply to the Court if there is a need arising during winding up any question relating thereto; it shall determine it.
Relieve a liquidator from compliance with duties prescribed on such terms as the Court considers just.
15. Dissolution
- Application: The liquidator applies for the dissolution of the company to the Registrar upon the issuance of the final summary and return.
- Early dissolution: If the realizable assets are not enough to cover winding-up expenses, and there is no requirement for further investigation, the liquidator can apply for early dissolution.
- Notice: A minimum of twenty days’ notice to the creditors and contributors is to be given before the application for dissolution.
- Confirmation: The Company is dissolved upon confirmation by the Registrar.
16. Property and Records of Dissolved Company
- Disposal: The remaining property and records will be disposed of in the way indicated by the shareholders, either through solvent or insolvent winding-up by the Liquidation Committee/creditors.
- Intervention: If no indication is given the Registrar may seek an order in Court regarding the disposal.
- Responsibility: No responsibility will be attached to the company or liquidator for records missing ten years after dissolution.
- Preservation of Records: The registrar can issue an order not to destroy the records of a wound-up company before the period of ten years.
Requirements for DMCC Company Liquidation
Some important requisites that must be met to ensure a successful company liquidation in DMCC include:
Approval from DMCC
The company has to obtain the approval from DMCC to wind up the company. It involves the submission of the necessary documents and payment of the fees through the DMCC portal. The approval of DMCC is very important as this guarantees that the process of liquidation is done in a manner that is consistent with the laws.
Completion of Legal Formalities
All legal formalities, including the settlement of debts and distribution of assets, have to be done as per DMCC regulations. All these formalities must be done so that the stakeholders can have a clear picture of the whole liquidation process and ensure it is conducted fairly.
Submission of Final Report
A final report has to be submitted to DMCC, which has to detail the liquidation process and verify that all obligations have been met. This report is a key document that gives a broad picture of the liquidation process and ensures compliance with DMCC regulations.
How Can Farahat & Co. Assist with DMCC Company Liquidation?
It is advisable for businesses seeking liquidation services to engage reputable liquidators in DMCC, such as Farahat & Co.:
- Years of Experience: We have more than 40 years of experience in the process of company liquidation as well as in accounting and regulatory issues.
- Regulatory Compliance: The firm guarantees full compliance with DMCC regulations to avoid risks and time delays.
- DMCC Approved Liquidator & Expertise: We are registered DMCC Auditors and Company Liquidators. Our auditors and liquidators hold expertise in handling financial audits, preparing documents, and getting them approved most easily.
- Tailor-made Solution: We offer solutions that are perfectly tailored for every business need with all possible support.
- Advisory Services: We are professional Advisors transparent in our dealings, guiding the business through the whole liquidation process.
Contact us today and we shall be glad to assist you.
