Do you wish to resolve your company and dissolve it forever in UAE? To ensure an effective, legal, and liability-free liquidation, liquidating a business in the United Arab Emirates requires strict adherence to legal and procedural standards. In contrast to deregistration, which is a quicker administrative cancellation with restrictions and is best suited for businesses with no debts or liabilities, liquidation entails formally winding up the business by appointing a liquidator to pay off debts, notify creditors, sell assets, and report to authorities.
This blog is a thorough company liquidation checklist in UAE, so read on –
Understanding Company Liquidation in the UAE and Deregistering
Federal Law No. 2 of 2015 on Commercial Companies governs company liquidation in Dubai, which applies to businesses that are required to formally cease operations as a result of shareholder decisions or insolvency. It may be mandatory (mandated by the court at the request of creditors) or voluntary (started by shareholders). As the primary player, the liquidator oversees debt settlements, asset liquidation, and communication with creditors. They also make sure that legal requirements are followed, such as posting notices of liquidation in newspapers for creditor claims for at least 45 days. This procedure safeguards shareholder interests and guarantees transparent debt resolution.
In certain Emirates, a company’s trade licence can be swiftly revoked through the administrative procedure of deregistration, also known as licence cancellation, provided that the corporation has no outstanding debts or commitments. It doesn’t need to notify creditors or designate a liquidator. Even if it’s quicker, if it’s used incorrectly, management and shareholders could still be held accountable for unreported debts following deregistration. Differentiating between these choices is crucial for managing responsibility and compliance.
Comprehensive Checklist For Company Liquidation in UAE
Here’s a simple company liquidation checklist in UAE to help you with seamless company liquidation services in Dubai –
Board Decision and Support from Shareholders
- Create and notarise a resolution authorising the process of company liquidation, including the rationale behind the closure, the selection of the liquidator, and the allocation of assets.
- Notarise and attestate the resolution through the UAE embassy and the UAE Ministries of Foreign Affairs if the shareholders are not UAE citizens.
Designation of an Authorised Liquidator
- Select a liquidator who is registered with the DED (Department of Economic Development) or free zone companies, the appropriate UAE jurisdiction’s authority.
- Obtain the acceptance letter from the liquidator attesting to their grasp of their legal obligations and their approval. Prepare a liquidation report for closing a business in the UAE accordingly.
Send in Your Initial Application And Supporting Documentation
- To initiate a company liquidation process, you must provide a copy of the trade licence, the articles of association and memorandum, the passports and identification of the shareholders, the board resolution, and the letter appointing the liquidator. A liquidator can prepare the liquidation process.
- Notify the licensing authorities of the initial liquidation process in the UAE.
Publicise the Liquidation Notice
- To alert creditors, publish a notice of liquidation in two local newspapers (one in Arabic) for a period of forty-five days. This should clearly state that you are officially closing a business in the Emirates.
- Invite claims from creditors within the notification period by sending them a registered letter. This is to settle any outstanding liabilities.
- During this period, stop starting new businesses.
Cancel Employee Records and Visas
- Revoke all labour cards and staff visas that are linked to the business.
- Pay off any unpaid employee debts, including gratuities.
- Obtain approval from the Ministry of Human Resources and Emiratisation (MOHRE).
Acquire Certificates Of Clearance for Company Liquidation in Dubai, UAE
- For liquidating your company, obtain no objection certificates (NOCs) and clearance certificates from the local municipality, landlord, immigration, customs, labour department, utility providers (DEWA, Etisalat/DU), and any other pertinent agencies.
- Close business bank accounts and get confirmation that the bank has closed. This will help you get a provisional liquidation certificate.
- Tenancy agreements should be terminated, and the necessary cancellation paperwork (Ejari or similar) should be submitted.
Final Report on Audit and Liquidation Process
- A thorough final audit report that covers the company’s financial status, asset sales, debt settlements, and employee obligations is prepared by the liquidator.
- Send the licensing authorities the liquidation report for evaluation. This will result in a smooth and compliant liquidation.
Deregistration of Corporate Tax and VAT
- Get a VAT deregistration letter from the Federal Tax Authority, file final VAT returns, and pay off all outstanding VAT-related debts.
- Submit final corporation tax returns and, if necessary, ask for confirmation of corporate tax deregistration.
Cancellation and Deregistration of Licenses
- For closing your business, send the licensing authority all clearance certificates, the liquidation report, and the associated payments.
- The authorities issue a final liquidation certificate and revoke the business trade licence after all responsibilities have been fulfilled.
Important Differences and Risk Factors to Liquidate the Company
Along with a company liquidation checklist in UAE, we also provide a guide on the key differences and risk factors involved in liquidation. Read more below –
- In order to protect shareholders of the company and prevent post-closure obligations, complete liquidation necessitates official creditor notice, asset liquidation, and debt settlement.
- Although company deregistration is quicker and easier to administer, it is only appropriate for businesses that have no outstanding obligations; management and shareholders are not protected if debts surface after liquidation.
- In order to protect themselves from personal liability in the event of creditor claims, managers and shareholders should pay attention to their legal obligations during liquidation.
- The necessity of compliance control is highlighted by the fact that several liquidation procedures, such as media publication and creditor notice, call for licence authority approval. This helps in a smooth and compliant closure.
Additional Practical Tips for Company Liquidation Services in UAE
- You can liquidate a company in Dubai far in advance to allow for the required notice period and the acquisition of the clearing certificate.
- If at all possible, arrange clearance certificates simultaneously on behalf of the company to save turnaround times.
- Hire seasoned liquidators and legal advisors who understand the subtleties of UAE jurisdiction (free zones authorities vs. mainland).
- Throughout the compulsory liquidation process and company deregistration, keep detailed records for future reference and regulatory audits.
- To prevent fines while dissolving a company, take into account the implications of VAT and corporate tax as soon as possible.
- Only confirm the final licence cancellation once all administrative and financial clearances have been obtained.
Final Takeaway
In order to safeguard creditors, shareholders, employees, and regulatory agencies, a firm must be liquidated in the United Arab Emirates using a methodical process of voluntary liquidation based on both local and federal laws. To ensure that the liquidation or deregistration process is seamless, compliant, and in accordance with the company’s financial realities, business services in the United Arab Emirates should seek professional services to manage these procedures and adhere to changing legislative frameworks.
A successful company liquidation has never been easy for business owners. When you are overwhelmed by the feeling of closure, let someone handle the intricacies of the procedure. You can also seek help from business consultants who help with company liquidation in the UAE. Xpert Advisory is one such company working across the UAE and other GCC regions that can guide you through the same. Call us for a consultation and learn how we can help!
FAQs
What Corporate Tax Responsibilities Exist In The United Arab Emirates During A Company’s Liquidation Services?
Before you finally liquidate a company in the UAE, companies must file final tax returns, pay off all tax obligations, register for corporate tax, if appropriate, and apply for tax deregistration with the Federal Tax Authority.
Is It Possible For A Business To Go Through Liquidation Without Hiring A Liquidator?
No, according to UAE law, a licensed liquidator must be appointed to supervise the company closure, pay off debts, alert creditors, and complete the liquidation report.
What Happens in The UAE if Liquidation Procedures Are Not Correctly Followed?
Penalties, continuing obligations for managers and owners, and potential legal action from creditors may arise from noncompliance with liquidation laws.
