The main reason for forming a business is to achieve financial targets and to realize these objectives; it is necessary to have financial stability in the company. But in a few circumstances, it is inevitable for companies to file for liquidation to settle the debt of creditor and dissolve the company.
The United Arab Emirates is a prominent destination offering tremendous opportunities for corporate growth and development. However, a few times, it so happens that the business persons wish to relocate into another nation, back home, or focus on a different business venture.
Additionally, not all companies can succeed in the UAE’s dynamic and competitive market. The inability to predict market trends has caused the liquidations of a variety of companies worldwide. Thus, some companies resort to liquidation.
Liquidating your business in the UAE Mainland
Liquidating your company in the Emirates might seem like a simple procedure when compared to starting one. But that is just a misconception as liquidation process is quite complicated and it usually takes 1-3 months depending on the jurisdiction and the activity.
To close/liquidate/dissolve a company in the UAE Mainland, make sure that all the licenses associated with the business are closed to avoid any issues in the future. If you cease operations of your business without officially cancelling the business licences and obtaining a full liquidation, you will accumulate penalties and fines when it is not renewed.
If your company has multiple shareholders, the procedure can take a bit longer as you must release your liabilities towards any creditors or partners and liquidation of shares is needed.
Different types of companies that require an official liquidator and liquidator report are -
- General Partnership
- Limited Liability Company
- Simple Limited Partnership
- Public Joint Stock Company
- Private Joint Stock Company
The process for cancelling a license is different for sole proprietorship, and companies with multiple shareholders. In the case of the former, cancellation must be applied via licensing authority, and needed clearances must be obtained from different departments depending on the activity;
- Directorate of Residency and Foreigners Affairs
- Ministry of Human Resources and Emiratisation
- The relevant water and electricity authority
- Federal tax authority
- The leasing entity
- Customs
Remember that, when going through the steps of officially liquidating a business in Mainland, all the business partners must be available in the country (or their Power of Attorney who is approved and attested to act to sign the shareholder resolution to close the company). Once you have applied for cancelling of a company through the Department of Economic Development (DED), follow these steps.
1. Closing a Business Bank Account
Any active bank accounts in the name of the business must be officially closed. Upon closing the account you must request for a Statement of Account for the last financial year, this will be needed for a Liquidators Report. Also, a Bank Account Closure Confirmation must be requested from the bank as proof of closure.
2. Immigration Clearance
Any active visas under the company sponsorship must be cancelled in addition to any dependent visas under any employees sponsorship.
3. Regulating Authority Clearance
The Regulating Authority must get clearances concerning the activity of the company, for example, if you would like to close down a trading company, a clearance letter should be requested from the Ministry of Customs and the Chamber of Commerce.
4. Third-Party Clearance
All dues must be paid to the landlord for any commercial space the company is renting, and a clearance letter should be obtained. Besides, you will require a final bill from ADCC or DEWA etc. and confirmation of terminated utility services which are registered under the business name.
5. De-Registering Publication
A company must file a notification in a locally based newspaper/gazette publication which states that the company is in the process of liquidation. In Abu Dhabi, this requires a 45-day period to enable any creditors to raise any issues before the liquidation is approved.
6. Company Assets
Any property under the company or shares held in other companies in the entity name must be sold or transferred. Proof of transfer or sale will be needed for the Liquidators Report.
7. Liquidators Report
An approved auditing company must be used who is licensed to prepare a Liquidators Report for the business.
8. Confirmation Certificate
Once all the above steps are completed, you can apply for a Confirmation Certificate proving the termination of the company license and de-registration of the company.
Many don’t bother to follow the procedures while planning to liquidate their company in UAE. This might not just get you into legal trouble, but will also affect any plans to set up a company in the UAE.
We at Commitbiz provide liquidation services for those who need the same. Apart from this, we also offer other services like business incorporation, licensing, office space, bank account opening, sponsorship and more in the UAE.
Get in touch with us today!