Setting up a company in the United Arab Emirates can be a very rewarding experience, but for many businesspeople, this experience may not last long. Some businesses may not be able to keep pace with the dynamic business environment or may face some unforeseen situation due to which the company might have to shut down. 

The management of the company needs to understand that there is a process of closing down a business which if not followed might lead to penalties.

What are Company Liquidation Services in Dubai?

The Liquidation of a company is a process in which the company ceases all business activities and is shut down completely. This happens to a company if it has been ascertained that the company is unable to continue its services. This may happen due to several reasons such as:

• Inability to pay bills
• Cash Flow Problems
• Mergers and Acquisitions
• Restructuring of the Business

There can be many other reasons for company liquidation. 

After the liquidation process, all the assets of the company are utilized to compensate for all the liabilities of the company. 

If even after all the liabilities of the company have been settled, some of the assets are left remaining, then these are sold, and then the profits are distributed among the directors and the shareholders of the company.

Why is Company Liquidation Important for Companies?

Company liquidation in UAE is the last resort for the management of any company. There are many benefits of company liquidation to the business, such as:

1. It will allow for the proper distribution of the assets of the company. First, all the assets of the company are used up to compensate for the liabilities of the company, and the remaining assets are sold off and the proceeds are then distributed among the shareholders.
2. Liquidation can also be done if the companies want to make a new start in the business or do not want to associate themselves with a certain brand in any way.

These two are the most important benefits of company liquidation, which are available to a business. But the management should keep in mind that these advantages can be availed only if they utilize the services of professional and reputed auditing services. 

There are many reasons which are why the management should opt for Company Liquidation.

The Company Liquidation Services require certain steps which need to be followed by a business. They will also have an impact on the VAT and Tax of the company. If the company is registered as a tax group, in that case, the management should never forget to deregister such business from a tax group as it may create problems in the future.

What are the Types of Liquidation

There are two different types of company liquidation that a business may adopt. These are:

1. Voluntary Liquidation

In the case of voluntary liquidation, the shareholders of a company will decide to wind up the company as they have no money to pay creditors. In this type of liquidation, priority is given to the creditors at the time of distributing the proceeds from the assets.

2. Compulsory Liquidation

Compulsory liquidation is a type of company liquidation that is put forward by a court order. Here, the assets of the company are distributed to the creditors and contributors based on the priority of claims.

What is the Role of a Liquidator

A liquidator is a person who is responsible for the complete liquidation process of a company. The management needs to be very careful while selecting a liquidator. This liquidator should not make any mistake in conducting the process, or the company will have to face penalties and problems in the future.

A liquidator is a chief decision-maker in a liquidation process. and has several duties to perform. Some of the duties of a liquidator are described below:

1. Assess all the Assets and Liabilities of the company

He will be responsible for all the assessments for the claims made. He will also be responsible for the distribution of the leftover profit after selling off the assets of the company.

2. Initiating the Winding-Up Process

Once the Board of Directors/Shareholders passes a resolution for the liquidation or winding up, and the appointment of a liquidator, the liquidator, upon the receipt of such resolution, issues an acceptance letter. This acceptance letter will also enumerate the process to be followed and the name of the liquidator.

3. Publishing the Liquidation Notice

Once the liquidation process is initiated, the liquidator publishes the liquidation notice, both in Arabic and English, in 2 local newspapers so that the news of the liquidation can reach the maximum number of people.

4. Overview of Collection & Distribution of Company Assets

If needed, the liquidator may overview the collection and distribution of company assets, and the settlement of liabilities. The manner of the distribution of assets will be mentioned in the acceptance letter

5. Preparing the Statement of Affairs and the final liquidator report

As the last step in the liquidation process, the liquidator prepares the statement of affairs and the liquidator’s report. In this all the details of the liquidation process are provided.

6. Provide information to the creditors of the company from time to time

The creditors of the company must be kept updated about the happenings of the business.

Company Liquidation Process in Free Zones

The liquidation process for free zone companies is similar to that of mainland companies, except concerning the notice period and the time frame in which the company has to be liquidated.

What are the Documents Required for Company Liquidation in Dubai, UAE

The Dubai government sets out different types of documents to be submitted for the liquidation process. These documents are required for company liquidation both in free zones as well as the mainland. The essential documents are listed below:

• A copy of the license
• The copy of the Memorandum of Association (MOA), with any changes
• Power of Attorney (if any)
• Passport copies of all the shareholders
• Copy of the Emirates ID
• Shareholder’s resolution
• Application form of de-registration

Liquidation of Companies established in Free Zones

In the United Arab Emirates, a company can be established in the Mainland as well as the Free Zone. It should be kept in mind that only the Approved Auditors are allowed to conduct an audit of the companies which have been established in the Free Zone. Every management should avail the services of reputed and professional auditors so that all the documents of the company are properly managed.

There are more than 37 free zones in the United Arab Emirates that cater different services to businesses. These free zones provide a platform for the companies and will help them to grow and develop in the Middle East.

Steps for Company Liquidation

Here are the steps for company liquidation, which should be followed by all the companies. The list of steps given below is not fixed and can be changed according to the needs and requirements of the company.

Step 1: Submission of notice to the concerned authority.

Step 2: All the company documents such as Company License, Formation Certificate, lease Agreement etc., need to be cancelled.

Step 3: The Company must obtain necessary clearances from the authorities.

Step 4: The liquidation of the company must be notified to the people in a Gazette.

JAXA Company Liquidation Services in Dubai, UAE

We provide the following company liquidation services in Dubai and the rest of the UAE:

• Assistance in preparing the Board of Directors/Shareholders resolution
• Auditing financial statements for the purpose of liquidation
• Preparing the Statement of Affairs and the Liquidator’s Report, including No Liability Letter
• Liaising with the licensing authorities for the submission of documents and liquidation of the company

Why JAXA?

The liquidation of a company in Dubai is a complex and time-consuming process. At JAXA, we help our clients in following the procedures to wind up a company in Dubai, UAE, should the need arise. JAXA is a financial consultant in Dubai, offering a wide range of services including accounting, auditing, software consultancy, and management. We have been providing the best audit services in Dubai and the rest of the UAE for over a decade.

For any company liquidation services in Dubai, contact us – we’d be glad to assist.