Limited Liability Companies (LLCs) are among the most often used business forms in the United Arab Emirates because of the flexibility and security they provide to shareholders. However, there are times when management or shareholders have to shut down the business because of changes in business strategy, financial difficulties, or the end of the intended period.
In the United Arab Emirates, liquidating a limited company is a formal, controlled procedure that includes financial and legal measures to guarantee that all debts are paid off and the business is formally disbanded. Here’s a guide to understanding limited company liquidation in UAE –
Understanding Limited Company Liquidation in the UAE
Liquidation, the official process of closing a firm in the United Arab Emirates, includes paying off debts, informing creditors and other stakeholders, revoking licenses, and deregistering the company from the government. A court may order a compulsory liquidation for insolvency or other legal grounds, or it may be a voluntary liquidation, started by the liquidator and the partners while the business is solvent.
LLC companies in UAE Free Zones and on the Mainland are subject to significantly different regulations. While Free Zone businesses adhere to their own Free Zone authorities, which frequently offer expedited procedures, mainland LLCs are governed by the Department of Economy and Tourism (DED).
Key Steps in the Limited Company Liquidation Process
Here are some crucial steps that you must follow during a limited company liquidation in UAE –
Resolution of Shareholders and Liquidator Appointment
A board resolution approved by shareholders authorizing the company’s dissolution and designating a liquidator initiates the process of closing a business. In the United Arab Emirates, a notary public is required to notarize this decision. Notarization and attestation by UAE embassies and ministries may be necessary if stockholders are located abroad. The resolution outlines the liquidation’s justifications, the identity of the designated liquidator, and the asset distribution plans in detail.
Acceptance and Initial Notification by the Liquidator
For a seamless liquidation of LLC in the UAE, the designated liquidator, usually an auditing firm or a registered liquidator with a license in the UAE, provides an official letter of acceptance that confirms their position. The liquidator subsequently submits the initial liquidation report or application to the DED or Free Zone authority to commence the liquidation process. The liquidator issues a liquidation certificate, serving as an official notification that the company has entered liquidation.
Public Notification and Creditor Claims
To safeguard creditors, the company is required to issue a declaration letter in two local newspapers, usually in Arabic and English, with one Arabic publication being mandatory for mainland LLCs. A liquidation notice in two languages is mandatory to proceed with the process. Creditors are granted 45 days from the date to submit their claims for outstanding debts against the company, as stated in the notice. This measure is essential for guaranteeing transparency and legally constraining future liabilities.
Distribution of Assets and Settlement of Liabilities
All unpaid debts, employee obligations, utility bills, lease agreements, and other liabilities are managed by the liquidator. This includes revoking company-sponsored employee work permits and visas. Along with closing bank accounts, the liquidator also gets clearance letters from the Federal Tax Authority (for company tax and VAT), Dubai Customs, and utility providers. A final audit report can only be prepared by the liquidator if all responsibilities have been fulfilled and after confirming no outstanding claims remain. A clearance certificate is mandatory from government bodies, like the Ministry of Human Resources and Emiratisation.
Submission of the Final Liquidation and Cancellation of License
Following the completion of the liquidation process, the liquidator provides the DED (Department of Economic Development) or Free Zone authority with the final audit report, clearance certificates, and a no-objection statement from creditors and shareholders. Following verification, the business is struck from the commercial register and the trading license is formally revoked by government entities. When the business obtains a final liquidation certificate, its legal existence comes to an end, and the company must cancel all types of business activities.
What Is the Main Difference Between Mainland and Free Zone Liquidation?
- Mainland Liquidation: Federal business regulations regulate the dissolution of mainland business in the UAE, which necessitates interacting with many government agencies, including the tax authority, utilities, immigration, and customs. Depending on the complexity of the clearance and the size of the organization, the process may take two to six months.
- Free Zone Companies: A more centralized authority structure is advantageous to businesses operating in free zones. By reducing external dependencies, many free zones in Dubai and Abu Dhabi provide a one-window liquidation service, enabling quicker processing (often between 30 to 60 days). Before a final cancellation, businesses must still pay all of their debts and comply with all legal requirements.
Documents Required for Company Liquidation
Below are some required documents for a limited company liquidation in UAE –
- Resolution of notarized shareholders authorizing liquidation
- Letter of acceptance from the liquidator
- Form and fees for the initial liquidation application
- A copy of the business’s establishment card and trade license
- Newspapers carrying notices of liquidation
- Clearances and certifications of no objection from the landlord, utilities, tax, immigration, and customs
- Letter of closure for a bank account
- The liquidator’s final audit report
- A statement attesting to the absence of outstanding creditor claims
Pricing
In the UAE, the price of a company’s liquidation varies depending on the jurisdiction and intricacy of the company in Dubai, UAE. Government departments fees for cancellation certificates, publishing fees for notices of business closure, liquidator fees for audit and administrative labor, and clearance certificate fees are examples of typical expenses. To prevent delays or fines, shareholders should set aside money for a seamless liquidation process. Also, you have to calculate the expense of appointing a liquidator.
Why Engage With Experts For Company Liquidation?
Coordination with many UAE authorities, stringent schedules, and numerous legal and regulatory procedures are all part of a company’s liquidation. Hiring legal and financial business consultants, such as Xpert Advisory guarantees timely submissions, appropriate debt settlement, and adherence to current regulations. Throughout the closure process, professional advice can safeguard shareholder interests and reduce the danger of incomplete clearance, penalties, or a drawn-out liquidation. Call our experts for a quick consultation!
Final Takeaway
Careful adherence to legal liquidation procedures intended to safeguard stakeholders and guarantee appropriate closure of business affairs is necessary when liquidating a limited liability company in the United Arab Emirates. Every stage, from creating shareholder resolutions to getting final approvals and canceling licenses, entails adhering to legal requirements and protecting creditors. Therefore, follow this guide for a seamless liquidation process.
FAQs
Is It Possible For A Business To Carry On With Operations When It Is In Liquidation?
Unless the liquidator permits necessary operations during the procedure, the company owners must cancel the business license and all trade activities once the liquidation resolution is passed and the process starts to concentrate on paying off debts and obligations.
What Occurs If Creditors Fail To File Claims Within The Allotted Forty-Five Days?
If no creditor claims are filed within the 45-day notice period, the business is lawfully permitted to disperse any residual assets to shareholders free of creditor claims.
Should Employee Visas Be Revoked Before Business Liquidation?
In order to adhere to immigration laws and prevent future legal problems, all employment visas sponsored by the business must be revoked prior to the completion of the liquidation.
