Mainland Company Liquidation
Mainland Company Liquidation
Closing a business in the UAE involves a series of legal steps to ensure all obligations are met and to avoid potential fines. Whether you’re winding down a sole proprietorship or a shareholding company, understanding the process of canceling your business license is crucial.
At Farahat & Co., we understand that the decision to liquidate a mainland company in the UAE is a significant one. Our dedicated team of experts is here to guide you through every step of the process, ensuring a smooth and compliant dissolution of your business.
Understanding the Need for License Cancellation
Canceling a business license is a critical step when shutting down operations. This ensures that government authorities are aware of the cessation, preventing the accrual of fines and penalties on an expired license. For those in a partnership or shareholding structure, it’s essential to settle all financial responsibilities to safeguard personal interests and maintain the integrity of one’s investment. Additionally, preserving your professional reputation is beneficial for any future business ventures you may consider. This proactive approach to finalizing business affairs reflects responsible management and foresight.
Step-by-Step Formalities for License Cancellation
The procedure for license cancellation varies based on your company’s structure:
| Company Structure | Cancellation Procedure |
| Sole Proprietorships and Establishments | – Apply for cancellation through the DED in Dubai or TAMM in Abu Dhabi. – Obtain clearances from:
|
| Shareholding Companies | – The process involves share liquidation, debt collection, and creditor payments before finalization with DED. |
Appointing a Liquidator
The appointment of a liquidator is mandatory for companies structured as:
- General Partnership
- Limited Liability Company
- Simple Limited Partnership
- Public Joint Stock Company
- Private Joint Stock Company
Freezing vs. Terminating a Trade License
Here are some aspects to compare Freezing a Trade License & Terminating a Trade License
- Definition
- Duration
- Business Activities
- Fees
- Extensions
- Future Operations
- Legal Obligations
- Governmental Approvals
| Aspect | Freezing a Trade License | Terminating a Trade License |
| Definition | Temporarily suspending business activities without closing the company. | Permanently closing the company and ceasing all business activities. |
| Duration | Can be frozen for up to three years. | Permanent closure. |
| Business Activities | No business activities can be conducted during the freeze period. | All business activities must cease upon termination. |
| Fees | A freezing fee is applicable. | Fees for cancellation and any related procedures are applicable. |
| Extensions | Cannot be extended beyond the specified freezing period of three years. | Not applicable, as the license is permanently cancelled. |
| Future Operations | The company can resume operations after the freeze period by reactivating the license. | The company cannot resume operations; a new license must be obtained for any future business activities. |
| Legal Obligations | Must meet certain conditions such as no sponsored individuals on the license. | Must settle all legal and financial obligations, such as debts and creditor payments, before termination. |
| Governmental Approvals | Requires approval from the DED and a report from the inspection division. | Requires various government approvals for cancellation, including DED, Ministry of Economy, among others. |
It’s important to note that the exact requirements may vary depending on the legal form of the company and other specific circumstances. It’s always best to consult with the company Liquidator for detailed guidance.
Steps to liquidate a Mainland Company in UAE
Stage 1: Initiation of Liquidation
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- Notarization of General Assembly Minutes: Document the decision of liquidation and the appointment of a liquidator in notarised minutes.
- Liquidator’s Official Acceptance: Obtain a formal letter from the chosen liquidator, confirming their acceptance of the role.
- Application for Cancellation: Fill out the necessary forms through the Department of Economy and Tourism (DED) or other approved channels.
- Issuance of Liquidation Certificate: Await the DED’s issuance of a liquidation certificate.
- Publication of Liquidation Notice: Publish the liquidation announcement in two local newspapers, initiating a 45-day grace period for debt claims.
Stage 2: Finalizing the Dissolution
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- Declaration of No Objection: Submit a declaration letter from the liquidator and partners to the DED, confirming there were no objections during the grace period.
- Government Approvals: Acquire the necessary clearances from various government entities to proceed with the license cancellation.
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- Cancellation of Firm Card: Terminate the firm card at the Ministry of Human Resources and Emiratisation.
- Visa Cancellations: Cancel any visas of foreign partners that are sponsored by the company, through the General Directorate of Residency & Foreigners Affairs.
- Submission for Final Approval: Submit all collected documents to the DED to obtain the final cancellation approval.
- Fee Determination and Payment: The DED will specify the required fees for the dissolution process.
- Certificate of Deregistration: Upon fee payment, receive the official certificate of deregistration, marking the completion of the company dissolution.
Following these steps ensures a legally compliant and orderly closure of your company in the UAE.
