Starting a company in Dubai is a very profitable decision for entrepreneurs all around the world. Entrepreneurs from all around the world are coming to Dubai to start their very own businesses. Dubai is booming with startup companies. However, there is also a rise in company liquidation in Dubai. There are various reasons behind the liquidation of a company.
A firm can choose to liquidate the company voluntarily or involuntarily for different reasons. Lack of finances to run the company can be a valid reason for the liquidation of a company. A company will also be required to liquidate if it commits any major crime or infraction. The company liquidation in Dubai can be a complicated and lengthy process. Company liquidation in Dubai takes quite a long time even for a knowledgeable person to liquidate a company in Dubai.
You should consider hiring Company Setup Consultants in case you choose to liquidate your company. Our experienced liquidator can streamline the process for you and save you from all the hassle.
What is Company Liquidation?
Company Liquidation in Dubai is an official insolvency process in which a company (LL Company, branch of company, sole establishment, freezone company) stops all of its business operations, and the assets of the company are divided among creditors and shareholders. In simpler terms, company liquidation refers to the dissolving of a company. A company can choose to dissolve if it is unable to run its regular business operations.
Why is Liquidation of Company Required?
A company can be liquidated for various reasons. Here are two of the main reasons behind company liquidation:
One of the main reasons for company liquidation is that the objective for forming the company has been met. In this case, it is no longer necessary to run the operation. So, the board of directors can choose to liquidate the company.
The second one would be that the company is bankrupt. A company will need to file for bankruptcy in case the company’s obligation outweighs its earnings and assets. In this case, the company can no longer meet its liabilities and will need to liquidate to pay off the debts.
What is the Role of a Company Liquidator?
In case a company chooses to liquidate, it must choose a company liquidator. A company liquidator is usually a chartered accounting or auditing firm registered in the UAE. The main task of a company liquidator is to sell the company assets and pay off the outstanding liabilities. The first task of the liquidator after being appointed is to provide a formal letter of acceptance. Once their task is completed, they must submit a liquidator’s report and a statement of affairs. It is required to complete the liquidation process of a company.
Here are the roles a company liquidator must fulfill:
- One of the major roles of a liquidator is the role of an evaluator. The first thing he must do is evaluate the assets and liabilities of the business in question. He will also handle the sale of the assets of the company and distribute the earnings among the creditors and shareholders.
- He will also need to keep the creditors updated on the situation
- He must manage the sale and distribution of the company assets
- He will also need to submit a final liquidator’s report to complete the liquidation process
Types of Company Liquidation
Depending on the reason behind the liquidation, there can be two types of company liquidation in Dubai. They are:
Voluntary Liquidation: When the company shareholders or the board of directors choose to stop the business operation and dissolve a company, it can be considered a voluntary liquidation. In a voluntary liquidation, the owners get to choose if he wants to liquidate the company or not. When a company achieves its goal, it might opt for voluntary liquidation.
Compulsory Liquidation: This is when a company is forced to liquidate. In case a company cannot meet its obligations, the creditors can petition the courts to liquidate the company. The creditors may choose to do this so that they can collect their investment. If the petition is valid, the court may compel the company to liquidate. Bankruptcy is one of the biggest reasons behind compulsory liquidation. Committing major crimes or infractions may also result in the compulsory liquidation of the company.
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The Process of Company Liquidation in Dubai
The UAE government will need you to follow specific guidelines when liquidating your company. The process is complicated by the number of documents and parties involved. This is why it is advised an expert seek professional help when liquidating your company.
Here are the steps you will need to follow to liquidate your company in Dubai:
1). Manage documents that justify the liquidation
First of all, you will need to acquire the documents that justify your decision to company liquidation. Many factors can contribute to the decision of company liquidation. It can be the decision of the board of directors to stop all its operations and dissolve the company. On the other hand, it can also be a court order forcing the company to liquidate. In any case, you will need to acquire the legal documents that validate your decision to liquidate your company.
2). Hire a liquidity services firm
The next strap of the process is to hire a liquidity services firm. The hired firm should handle all the aspects of the company liquidation process. Sometimes it is required by the authority that you hire a professional liquidity services firm. So, at this step, you should hire a chartered accounting or auditing firm to manage the liquidation process. The government requires that you hire a liquidity services firm to ensure total openness and objectivity in the liquidation process.
3). Notify the company trade license authority
After hiring a liquidation services firm, you must notify the authority where you issued your business trading license about the liquidation of your company. In most cases in Dubai, it is the Dubai Department of Economic Development (DED). You must submit a formal application to notify the DED about the liquidation of your company. Once the application is accepted, the news of the liquation must appear in at least two local newspapers.
4). Cancel all corporate documents
The next step of the process is to cancel all the corporate documents related to the business activities of the company. These will involve documents like trade licenses, Office lease contracts, Company formation documents, and many others. You will need to make sure that all the employees have been dismissed from the company and all the liabilities have been paid off. Once all the corporate documents have been annulled, you should keep the cancellation letters. You will need these letters to complete the liquidation process.
5). Publish the liquidation report
Once the liquidation of the company is complete, the hired liquidation services firm must publish a liquidation report. Theory must also provide the company registrar with an application for deregistration and the final liquidation report. Once the application for registration is approved, you can collect the certificate for registration from the registrar. With this, the liquidation process for the company will be completed.
Documents Required for a Company Liquidation in Dubai
The process of company liquidation in Dubai is quite complicated. You must follow the rules and regulations set by the UAE government when liquidating your company. This also refers to the specific documents you will need to provide to liquidate your company.
Here are the documents required for a company liquidation in Dubai:
- Photocopy of the original trade license
- The memorandum of association (MOA)
- Photocopy of all shareholders’ passport
- Photocopy of your emirates id
- Application form for deregistration
- Closure letter for the corporate bank account
How can we help you?
If you want to liquidate your company in Dubai, but you do not know where to get started, then you are in the right place. This is because Company Setup Consultants have helped numerous companies with liquidation in the UAE marketplace. Our experienced Company Setup consultants will answer all your company liquidation-related queries. Contact us today and hit the ground running.
Click here to book a free consultation with our experts and learn more about the process of company liquidation. Call +971582595164. You can also send a WhatsApp message at +971582595164. For email assistance, mail your query at firstname.lastname@example.org
What are the documents required to file corporate insolvency?
A company will need to file for insolvency in case it can no longer pay off its outstanding debts. This is the first step of company liquidation. Here are the documents needed to file for corporate insolvency:
- Filled up cancellation form
- A formal statement from a registered company liquidator accepting insolvency duty
- Signed and dated partnership cancellation contract
- Notarized central committee minutes affirming company dissolution and employment of liquidator
You might need to acquire other legal documents to obtain the approvals of the government agencies to stop the business operation and liquidate the business.
What happens when a company goes into insolvency?
When a company fails to pay its outstanding debts or obligations, it will need to apply for bankruptcy. When a company goes into bankruptcy, it will no longer have the financial resources to run its business operations. So, it will need to close all of its business operations. Next, the company will need to liquidate and sell all of its assets to pay the creditors and shareholders. It will also need to apply for deregistration and cancel its trade license.
How do I liquidate a company in Dubai?
Company liquidation in Dubai is a time-consuming and complicated process. You will need to hire a UAE-registered Company liquidator to liquidate your company in Dubai. Here are the steps you can follow to liquidate your company in Dubai:
- Obtain documents that explain the liquidation
- Hire a liquidity services firm
- Inform the company trade license authority
- Cancel all commercial documents
- Publish the final liquidation report
How long does it take to liquidate a company in UAE?
Typically, the company liquidation process will take around 45 to 50 days, considering the steps of the liquidation process are executed on time. The time it takes to liquidate any company in UAE will depend on various factors. The size of the business operation, the location of the company, and the type of business activities will decide how long it will take to liquidate a company in UAE.
For example, if you run your business operation in the free zone and perform one type of business activity, you can liquidate your company by visiting one department of the authority offices. However, on the mainland, you will need to get approval for liquidation from multiple departments, which can be located in different locations.
How much does it cost to close a company in Dubai?
You can complete the company liquidation process by following the guideline of the Dubai government. The cost of liquidation involves the renting fees of a liquidator, application fees, deregistration fees, and many others. Depending on the charge of various departments, the liquidation process can cost you from AED 1,500 to AED 8,000. The cost will hugely depend on the size of your business, the type of your business activity, and the location of your business.
What are the disadvantages of liquidation?
The first casualty of company liquidation is the employees of the company. The company will need to formally dismiss all of its employees if it decides to liquidate. The shareholders will need to give back any kind of illegal dividends they receive from the company. The supplier and creditors of the liquidated company might lose money due to the liquidation.
What happens after a company is liquidated?
Once a company decides to liquidate, it will need to stop all of its business operations. This means the company will be required to fire all of its employees and de-register the company. It will also need to cancel its trade license. Next, it will need to sell all of its assets to pay the creditors and the shareholders. Once the liquidation is completed, the business will not exist anymore.