Shutting down the business at the right time is essential to reduce further losses. Don't worry! You are not the first entrepreneur to consider closing a company and surely you will not be the last. But it's a serious decision and one that shouldn't be taken lightly. You need to brace yourself for the appropriate steps involved in the process, regardless of the final decision. Closing a company requires a specific procedure to be followed. This process is just as necessary as the steps required to start up a company. Regardless of what type of company you own in the UAE, you must terminate your business license and all related permits when you decide to shut your business. This article provides information on the formalities for closing your business and cancelling its licence correctly.
Things to Know Before Closing Down of Your Business in UAE
Here's what you are required to do.
- Collect outstanding receivable accounts (before notifying clients about shutting down of your business). This could be daunting due to the economic dislocation caused by the coronavirus pandemic but seek to gather as much as possible.
- Sell off stock. Consider a going out of the business sale. Alternatively, you can donate your product to charity — for instance; a restaurant would give food to a food bank. That kind of donation is deductible. If your company is a corporation, the deduction would be taken by the corporation. Otherwise, it is a tax deduction made on financial returns by the company owners
- Notify your creditors (suppliers, service providers, lenders, and utilities). Doing this in the right way limits the amount of time a borrower can ask for a debt.
- Notify your clients and manage any remaining contractual responsibilities.
- Please note to refund any deposits or refunds for undelivered products or services not provided.
- Notify the workers and compensate them. When necessary, give your workers some warning. When you need a team member to help the company wind up, give the employee a small incentive to stay until the very end. The budget on the last day to pay workers their final paychecks, including the benefit of accumulated, unpaid sick days if the state needs it. Remember that if you have received a paycheck insurance plan loan related to coronavirus, you will have to pay back all at a time, if you lay off your workers after you have received the loan within the eight weeks.
- Liquidate your company assets in an orderly fashion.
- To the extent practicable, settle or pay your debts, prioritized to cover your responsibility such as money owing to your lender, bank, vendors, utilities and service providers. Some borrowers may accept less than the full amount owed in exchange for timely payment due because of the coronavirus pandemic. Ask for letters depicting that the bills are paid in full as you pay off each creditor.
- Submit final sales tax funds and forms due up to the closeout date.
- Cancel your business credit cards and subscriptions.
- If you have sold your inventory, you will need to inform your creditors several days before you close your company, and publish a notice of your imminent closure in a local newspaper in some states.
- Close your company bank account and any other related accounts.
- Cancel state or county licenses including your trade license, fictitious or assumed trade name and business license.
- File your final income tax returns, by ticking the box mentioning that this is your final return.
- Distribute all remaining assets carefully to yourself and to any other owners.
Stages to Dissolve All Kinds of Companies in UAE
There are two stages of this procedure.
- Prepare a notarized General Assembly minutes confirming liquidation of the corporation and appointing a liquidator.
- Arrange an official letter from an enrolled liquidator who acknowledges the obligation.
- Apply for cancellation by filling out the form required via DED or other approved channels.
- DED must issue a Certificate of Liquidation.
- Post the liquidation notice in local newspapers.
- The notice gives the debtors a grace period of 45 days to apply the claims from the date of issue.
- Send a letter of declaration from the liquidator and the partners to DED is stating no opposition from any other party during the grace period.
- Collecting other government bodies' approvals required to cancel a licence.
- Cancel the firm card at the Ministry of Human Resources and Emiratisation.
- Cancel the foreign partners' visas sponsored by the company at the respective Directorate-General of Residency & Foreigners Affairs.
- Submit all of the above documents to get final cancellation approval.
- The payments will beset by DED.
- After paying the required fees you can obtain the certificate of deregistration (cancellation).
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