Audit and Assurance

Why Outsource Company Liquidation process?

January 6, 2021 Comments Off on Why Outsource Company Liquidation process?

Association of two or more people to carry out business for profit-making purpose is termed as Company. The Company got a separate legal identity in the eyes of the law but cannot perform the business activity on its own, to carry out business processes Company needs a group of people. Setting up of Company is a challenging task, as it requires lots of hard work and investments. Companies are of various types like Public Company, Private Company, Sole proprietor, etc. all these companies have set their own rules and laws for long-term profitmaking. Multiple factors are responsible for the downfall of the Company like technological changes, improper management of debts, improper management of public services, etc. When the Company is on the verge of extinction, it is termed as liquidation Company.

What does Liquidation Means?

Liquidation of a Company means ending up of existence of the Company. In simple language, Liquidation means ‘Dissolution.’ It is also known as the winding up of a Company. Liquidation occurs when a Company is unable to fulfill the daily market requirement. Company liquidation process occurs when the setup goals of the Company are not fulfilled. When no other factors help the Company to stand, then the Company is left with a liquidation option. The process of liquidation is repaying creditors by selling assets of the Company like land, machinery, etc. Liquidation usually occurs to repay the creditors. After the liquidation process, the Company is no longer function-able and even cannot do any other business in the future.

Liquidation Process in UAE

Liquidation process of Company is carried out in UAE in the following cases-

  • Majority shareholder’s decision to liquidate the Company.
  • If the accumulated loss occurred to the Company is greater than half of the authorized capital.
  • If the court finds that, the Company cannot sustain and hence decide to liquidate the Company.
  • If the vital members of the Company quit the Company and the shareholders, decide not to continue with the Company. This is called voluntary liquidation.

Appointment of Liquidator- Outsourcing of Liquidation Process

When Company fails to maintain its name in the global market and thus to suffer losses, and that is the reason Company decided to go for the liquidation process. A liquidator is a person appointed by the shareholders or owner of the Company or by the court to execute the liquidation process. The liquidator has to accumulate all the assets of the Company and to settle the debts of the Company. He is neither a member of the Company nor has any connections with the Company. Once liquidator executes the process of liquidation, the existence of the Company comes to an end.

Benefits of Outsourcing Liquidation Process-

1) Faster Process

Outsourcing the liquidation of the Company makes the liquidation process faster. A liquidator is appointed by the government who approaches the Company and do the necessary process of liquidation. It is faster than courts as you have to approach the court for the proceedings than the court will give you a date to represent your case, while appointing an outsourcing agency for liquidation is much easier. You do not have to approach them; instead, they approach you and try to complete with the liquidation process in one go. They are the professionals of the liquidation, and that is the reason for quick decisions.

2) Error Free

Outsourcing agents are well trained and well versed in the liquidation process. They are not new to this field of liquidation and therefore no chances of error in the process. He is well acquainted with his job and is performing this task for years. He is professional and does not have any interest in the Company; his only interest is to justify the position that is professionally given to him so that no errors can be made.

3) Professional Way

Performing liquidation tasks is not a childish job. It really needs abundant skill to perform this tedious task. No such random person can perform the liquidation process. The liquidator should be well versed with the whole procedure and laws of liquidation. Professionals like Jaxa Chartered Accountants, who are professionals in the liquidation process, should be consulted. A liquidator is trained in this liquidation process, so the process goes not only smoothly but also in a professional way. Professionalism is required as the Company is liquidated and the creditors have appointed him for selling off assets, and thus, he does justice by making repaying to them without his interest in the process.

4) Unbiased Decisions

The decisions of an outsourced liquidator are unbiased as he is professional and is being called for the sum of money who does not have any interest in the Company. The directors of the Company can also do the liquidation process, but there are vast chances of biased decision as to their main focus in on their profits. Therefore, the Company approaches professionals who have no connection with the Company and members, which means the decision will be taken considering the repayment of debts only. The decision only favours creditors as they are in debts.

5) Burden Free Process

Outsourcing means the appointment of an external professional individual or Company. Once the Professionals are appointed, the entrepreneur can now focus on other essential aspects of business, leaving this liquidation tension aside. As discussed earlier, it is a burden-free process as they are professionals who know their job and even do not have any interest in the Company. There is no burden of any biased decision, unprofessionalism, or errors in the liquidation process. Their appointment makes sure that you will be credited with your money debts for sure without any problem.

6) No Leakage of Confidential Data

Liquidation includes all the critical and confidential data of the Company. If the members of the Company perform the liquidation process, it is a high probability that they can leak the professional data to some other company for monetary benefit or uses the data for the benefit of their own. The appointment of the professional liquidator will solve this confidential leakage data problem, as he has no interest in the Company as well as he has no interest in the formation of a new Company. The important data is safe with him. He has nothing to do with the Company’s data; he is only interested in liquidation.

7) Protection from Personal Liability

All liquidators appointed by directors, courts, or creditors are required to perform post liquidation investigations. The Professionals are free from personal liability as post liquidation investigation is done before the appointment. If the members of the Company are appointed as liquidator, then there is a probability that they can have their personal liability or debts that they can satisfy with the money obtained by liquidation. Professional liquidators are free from personal liability as they are not members of the Company; their only relation with the Company is as a professional liquidator only.

8) Tax Auditing

Taxes are the pivotal source of funds for the government, which they used in the growth and development of the economy. Once the company’s shareholders decided to wind up the company, the first thing to take place is tax auditing to make sure about the legality of the company. Through tax auditing, the government came to know about the tax liability of the company. Before winding up the professionals are informed about the tax liability incurred by the company. This information about tax liability helps them to make repayment of taxes with the amount incurred by liquidation. The prior knowledge of Tax Audit helps them to make the preferential choices of how and what amount of money to be given to whom.

Company liquidation is a tedious task, and that’s why there is the need for Professional assistance like Jaxa who not only helps you with the liquidation process but also helps you with the establishment of new Company or auditing services or accounting services, etc. For more details, you can Contact Us– We are here always to help you out.