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 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.