Free Zone Company Liquidation in UAE
Free Zone Company Liquidation Services in UAE
A company’s Liquidation or closure is when a corporation or business entirely shuts down all of its activities and distributes all of its assets and properties to its creditors and shareholders.
Free Zone Company liquidation in UAE is a defined process that entrepreneurs must follow in the case of a company’s closure.
Specific procedures must be followed for a seamless company liquidation in Dubai. We know how to assist you in the seamless closure of your company or organization. The process is also known as corporation de-registration.
The conditions listed below must be met to liquidate a business or company in the UAE. The requirements may differ from one free zone to the next, but most of them will be the same. We can assist you in completing this problematic chore in any of the UAE’s free zones.
What is Company Liquidation?
Company closure is when a debt-ridden firm shuts down operations and sells its assets to pay off its debts and other commitments. It is liquidated when it is determined that a firm can no longer operate. It might be due to various factors, including insolvency (which is generally the primary cause), a refusal to continue operations, and so on.
If a company goes bankrupt, the liquidator sells the firm’s assets to pay off all debts. After repaying the creditors, the remaining positive balance is dispersed to the company’s shareholders.
A liquidator is a person who has been appointed to dissolve a business and put it out of business. This individual is in charge of selling assets to pay off the company’s internal and external debts.
Various Types of Liquidation of Limited Companies
A company’s closure can be accomplished in three ways. All of these situations necessitate the services of a liquidator.
The shareholders and directors begin the voluntary closure procedures, Creditors’ Voluntary Liquidation (CVL), and Members’ Voluntary Liquidation (MVL).
Creditors frequently begin the mandatory procedure, similar to a court order.
Read on to learn more about each of the three categories:
1. Creditors’ Voluntary Liquidation of Creditors:
A Creditors’ Voluntary Liquidation (CVL) is triggered by a shareholder resolution employed by bankrupt corporations.
In this instance, the corporation becomes bankrupt, and the directors or owners begin the procedure to prevent judicial involvement or compulsory dissolution. In other words, the company declares insolvency before its creditors may take legal action against it.
2. A Members Voluntary Liquidation (MVL)
A Members Voluntary Liquidation (MVL) is a formal procedure for winding up the affairs of a solvent corporation. A solvent corporation has more assets than liabilities and can pay off all of its debts.
3. Compulsory Liquidation
Compulsory closure is a term used to describe the process of liquidating a business. Compulsory closure are frequently started by a creditor who wants to use a court order to compel a firm that can’t pay its debts to close down.
What is the Requirements for Free Zone Company Liquidation in UAE ?
Company closure in Dubai follows a specific procedure depending on the business jurisdiction. The Free Zone Company closure procedure in Dubai comprises a series of actions that the entrepreneur must do to guarantee a smooth company closure in the UAE.
• There must be no obligations in the firm.
• All current visas must be revoked.
• All business bank accounts must be closed.
• At the Liquidation stage, any assets must be distributed to the shareholders or a third party.
• All fees related to the free zone authorities must be paid.
• The Free Zone Authority must provide immigration approval.
• A liquidation resolution must be prepared, and a licensed liquidator must be appointed to carry out the operation.
• By creating a final Audit Report/Liquidation Letter, the liquidator must approve the course of action for the business’s Liquidation and submit proof that the company has no assets or obligations/liabilities.
What is the Process of Free Zone Company Liquidation in UAE ?
Each free zone has different closure procedures, but most of them follow the same procedure. The following steps are required for free zone company closure in the UAE.
Step 1: To Get a Signed Board or Shareholder Resolution
It is necessary to have a signed Board or Shareholder Resolution in which all partners agree to terminate the organization. Upon filing the company termination request, all power and obligations of the company’s
directors will be terminated.
Step 2: Notify the Free Zone Authority Officially
The free zone must be notified of the desire to cancel, and the free zone will provide you with a cancellation form. The original signed board resolution must be provided with the cancellation notification. Subsequently, the free zone will issue a free zone termination invoice to acknowledge the cancellation request.
The free zone will begin the legal procedure of dissolving the firm once the cancellation money is received.
Step 3: NOCs & Clearances
All utilities such as DEWA and communications services (Etisalat) in the company’s name must be terminated. A clearance letter must be obtained; any commercial space in the company’s name must also be canceled, and a clearance letter received.
Step 4: Employees and Sponsorship
All visas and work permits issued in the company’s name for workers and dependents must be revoked. However, keep in mind that, under UAE labour law, a corporation must provide an employee with two months’ paid notice before terminating their contracts in a company shutdown.
Step 5: Make a Formal Announcement
A 15-day formal notification in an Arabic newspaper/gazette declaring that the firm is closing is essential. If no claims are filed or resolved, settlement documentation must be submitted to the free zone authority for a closure confirmation to be issued.
Step 6: Confirmation of Termination
The Free Zone authorities will provide the company termination certificate when all of the requirements mentioned above have been fulfilled. It’s essential to keep in mind that officially terminating a Free zone firm might take two months.
Step 7: Business Bank Accounts
The firm termination letter can be taken to the bank to terminate the corporate bank account after being issued. Any leftover bank balance will be distributed among the former firm partners unless otherwise mentioned in the board resolution.
How Long Does a Company Liquidation in the Free Zone Last ?
If all other procedures and formalities are followed, the liquidation process might take 45 to 50 days. A free zone will have a single point of contact to close down the business, but a mainland business will need permissions from different departments located across the country.
Also Read: Mainland Company Liquidation Services
Hire the Best Registered Company Liquidators in Dubai
If you want to liquidate your Free zone Company in the UAE, you can choose Farahat & Co., as a reputable Company Liquidator.
We can help you with the whole closure process and all of the procedures mentioned above hassle-free and guarantee that the business liquidation process is 100 percent compatible with UAE Company Law standards. In the UAE, we have years of expertise in providing error-free company liquidation services. To ensure that the liquidation procedure runs smoothly, our highly competent and experienced liquidators will handle all essential documentation, clearance certificates, utility cancellations, visa cancellations, etc.
Contact our experts for a free introductory consultation on how to go about completing a hassle-free company closure.
What You Need to Know About Free Zone Company Liquidation in the UAE ?
Liquidation of a free zone company refers to closing the business in a UAE free zone. It is done in a formal, organised, and open way. The whole process is checked by the free zone authority or the court. The liquidation makes sure that the company is no longer registered, the debts are paid, and the assets are distributed.
The major intention of liquidation is to make sure everyone is safe when they leave the market, along with their rights being protected. With proper liquidation, the chance of being blacklisted also gets minimised. The whole process of liquidation helps the business to avoid fines, visa issues, along other legal and financial problems.
In the end, this could impact their ability to do business in the future.
What does it mean to liquidate a free zone company?
If a company that is registered under a free zone license starts shutting down its business, it is called free zone company liquidation. This particularly takes place when a shareholder resolution or official directive takes place. It includes:
- Paying all debts, dues, and fees, and stating solvency whenever necessary
- Giving the extra assets to shareholders or creditors based on their rights
- Deregistration and termination of the company certificate, along with the cancellation of the company’s trade license
- Hiring a licensed auditor or official liquidator to handle the process. They will also do a final audit or review and write a report on the whole liquidation process.
- Finally, liquidation isn’t all about closing the company but meeting all the legal, financial, and regulatory requirements
Why Following the Law Is Important ?
There are a lot of reasons why following rules is important during the liquidation process. The UAE commercial companies law and specific free zone rules govern the free zone companies in the UAE. All the rules are strict and should be followed during closing. In case you fail to follow the rules, there is a chance of getting fines, penalties, visa restrictions, and even being blacklisted.
This will negatively impact any plans of business plans in the future. As you follow the rules in the right manner, all the parties involved, like creditors, employees, landlords, utility providers, and even government agencies, feel respected. All of these rules help the future of business in the UAE much more easily.
Companies must meet regulatory requirements like deregistering for taxes, following the Ultimate Beneficial Ownership, and also getting clearance from the right authorities.
If the company follows the law, it can leave the market with a clean record, protecting shareholders and directors from liability, avoiding fines or being blacklisted, and keeping the option to start over in the future if they want to.
What Kinds of Free Zone Company Closures Are There ?
There are different factors, like financial situation, debts, that impact the closing of free zone companies are different. Typically, the main types are:
- Winding Up of Summary
- Creditors Winding Up
- Bankruptcy is started by the court
All of these closing techniques are set out in the UAE Commercial Transaction Law No 18 of 1993, and also the free zone rules.
Summary of the End
In short, Winding Up happens when the company doesn’t owe anyone anything or can pay off its debts within a certain amount of time (usually six months).
Summary winding up procedure:
Directors of a company sign a statement of solvency that says the company can meet all of its obligations. A special resolution is finally passed to end the company. This resolution is called a shareholders’ resolution.
If the company has assets, they are divided among the shareholders; if it doesn’t, the company is quickly dissolved, and the registrar records the dissolution. It is the easiest way to close a free zone company if it doesn’t have debts or obligations.
Creditors’ Closing Up
The creditors’ winding up is chosen when the company owes money or debts through a formal liquidation process with creditors. The company passes a resolution to close down by calling a meeting with creditors. Similarly, after all claims are paid, the remaining money is given to shareholders as assets. Finally, a liquidation report is made and sent for deregistration.
All of this helps in the protection of creditors’ rights before the business is closed.
Going bankrupt
The company that isn’t able to pay its debt or goes bankrupt has to close under the legal process. This process is made by the UAE Commercial Transactions Law no 18 of 1993. Any company that doesn’t look good can file for bankruptcy. But for the whole process ,a liquidator appointed by the court must be present. He/she will take care of liquidation, asset realisation, debt settlement, and distribution with the court’s permission.
During the whole process of bankruptcy, the creditors are treated fairly. The whole process of bankruptcy can take longer and impact the image of the company.
Shareholder Resolution and Appointment of a Liquidator
The board or shareholders of the company make a formal decision to liquidate.
The liquidation process is managed by a licensed liquidator, which is usually done through an approved audit firm or UAE-licensed auditor.
Sending in the First Application
Send an official request for liquidation or termination to the right Free Zone Authority, either through their portal or in person.
Send in the necessary papers, such as the trade licence, MOA, shareholder resolution, liquidator’s acceptance, and so on.
Start the process of deregistering corporate tax and VAT (if registered), and make sure you follow all the rules (for example, Ultimate Beneficial Ownership if it applies).
Cancelling an employee’s visa and work permit
Stop all work permits, investor visas, and employee visas that are connected to the company.
According to UAE Labour Law, you must pay any outstanding wages, end-of-service benefits, and other employment obligations.
Getting Clearance (NOCs)
Get clearances and No Objection Certificates (NOCs) from different people:
Utility companies (like electricity and water), telecom companies (like internet and phones), landlords, or property departments in free zones.
Close a business bank account—get a letter from the bank saying the account is closed.
Customs (if the business dealt with imports and exports).
Public Notice and Final Paperwork
A lot of free zones require that a public notice be published (usually in Arabic in a local newspaper) announcing the liquidation. This lets any creditor or third party make a claim.
The licensed liquidator writes a final liquidation (audit) report that shows how debts were paid, how assets were divided, and that there are no outstanding debts.
Certificate of Deregistration and Termination
The Free Zone Authority gives a deregistration certificate or company termination certificate once all the clearances, NOCs, paperwork, and final report have been submitted and checked. This takes the company off the register of the free zone. It means the legal closing of the company is done properly.
What Are the Most Important Things for a Successful Liquidation ?
There are various things that can be done for a smooth and efficient liquidation. They are:
- Hire a licensed liquidator or audit firm from the free zones
- The company should be able to pay off all its debts before the provided time
- All the active visas and work permits connected to be company must be cancelled
- The business bank accounts must be closed, and the letter from the bank must be received
- All the debts, including fees to the free zone authority, along with rent, lease, supplier bills, etc, must be paid
- The assets must be either given to shareholders or other people
- All the paperwork, like the trade license, MOA, shareholder resolution, liquidators’ report, clearance letters, NOC, and final audit report, must be submitted
- All the laws and rules, like tax deregistration, visa, and immigration law, must be followed
The Free Zone Authorities We Cover
Free Zone in Common Companies may be liquidated under the following authorities:
- DMCC stands for Dubai Multi Commodities Centre.
- JAFZA stands for the Jebel Ali Free Zone Authority.
- DAFZA (Dubai Airport Free Zone Authority) and other Dubai/UAE Free Zones all have similar rules, but the details may be different.
Why Use a Professional Liquidation Service ?
There are plenty of advantages to hiring a professional liquidation service. A licensed audit firm or liquidator has a better idea about the paperwork, decisions, clearances, along rules. This knowledge allows your company to lower the chances of mistakes. Similarly, they also have a better idea of working with free zone authorities, immigration, utilities, banks, and other important people for the required clearances.
One of the key advantages includes a better final audit report, dividing of assets, and sending in the final paperwork. All of this makes the process smooth, simple, and better to understand. There is the least chance of unpaid debts, visa and immigration problems, and missing paperwork with a professional liquidation service.
All of this helps your company to save from fines, being blacklist, and other issues.
Common Questions About Liquidation of Free Zone Companies in the UAE
What does it mean to liquidate a Free Zone company ?
The legal process of closing a company in a free zone area is the liquidation of a free zone company. It includes paying off debts, cancelling visas, clearing obligations, deregistering, and getting the termination certificate. The whole process goes for free zone-registered companies only.
How long does it take to liquidate?
It takes 2 to 3 months for liquidation if the company has no debts or disagreements. But if there are creditors, unpaid debts, or disputes, it could take three to six months or longer, especially if a final audit, public notice period, or court proceedings are needed.
What papers do you need to liquidate?
Common documents needed are a trade licence, a Memorandum of Association (MOA), a shareholder resolution or liquidation resolution, an appointment letter from a licensed liquidator, a corporate bank account closure letter, clearance letters from utilities, the landlord, telecommunications, customs (if necessary), a final liquidation report/audit report, visa cancellation documents and any other forms that are specific to the Free Zone.
What do you do with employee visas and end-of-service benefits?
You need to cancel all of your employee visas, investor visas, work permits, and dependent visas. All the final salaries, end-of-service gratuities, and other benefits need to be paid before going ahead with the liquidation process.
What is the difference between creditors’ winding up and summary winding up?
Summary winding up is the fastest and least formal way to end a business. This process is followed when the company has no debts or ability to pay them. However creditor’s winding up is for companies that owe money or have liabilities.
It includes calling creditors, hiring a liquidator, paying off debts, distributing remaining assets, and formally closing the business.
If a company has debts, can it go out of business?
Yes, creditors can wind up the company (if it can be done) or file for bankruptcy and have the court start the liquidation process (if it can’t). Based on the court’s liquidation process, you will have to pay off debts through asset realisation, creditor meetings, etc.
What Free Zone Authorities do you work with?
The most common free zone authorities that we work with are DMCC, JAFZA, DAFZA, etc. The services that we offer are based on the zone. However, the general liquidation framework applies to most free zones.
Conclusion
In the UAE, liquidating a Free Zone company is a planned and legally required process that makes sure the business leaves the market cleanly, with all debts paid, obligations met, visas cancelled, and proper deregistration. Whether you choose summary winding up, creditors’ winding up, or, in the worst case, bankruptcy, the most important thing is to follow all the rules set out by the relevant Free Zone Authority and UAE laws.
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