13 Aug 2024
When a company decides to cease operations, liquidation becomes a crucial step to ensure legal and financial compliance. Company liquidation in Dubai involves a structured process that needs to be meticulously followed. Whether you’re closing your business due to financial difficulties, business restructuring, or strategic decisions, understanding the liquidation process is vital for a smooth transition.
Benefits of Liquidation Services in Dubai
Expert liquidation services in Dubai can streamline the process, ensure compliance with regulatory requirements, and facilitate a more orderly transition. Some of the benefits of using professional liquidation services include:
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Time-Saving: Professional services handle all the administrative tasks, allowing business owners to focus on other priorities.
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Expertise: With extensive local market knowledge and regulations, liquidation consultants provide valuable insights and guidance.
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Cost-Effective: Proper management of the liquidation process can help minimize costs and recover maximum value from the company's assets.
Understanding the Types of Liquidation
In Dubai, there are different types of liquidation, primarily voluntary and compulsory.
Voluntary Liquidation occurs when the shareholders decide to liquidate the company willingly. It often happens when the company is solvent but chooses to close due to strategic decisions, mergers, or restructuring. Voluntary liquidation allows for a more controlled and planned closure process.
Compulsory Liquidation: This type of liquidation is usually ordered by a court when the company is insolvent and unable to meet its financial obligations. It involves a more stringent and legal-driven process to ensure all debts and liabilities are settled.
Stages of Liquidation
The process of liquidating a Mainland company involves two main stages:
Stage 1
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Notarized MOM Preparation: Draft and notarize the Minutes of Meeting (MOM) when deciding to liquidate the company and appoint a liquidator (if necessary).
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Liquidator Appointment: Obtain an official acceptance letter from the appointed liquidator.
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Cancellation Application: Submit all required forms to initiate the cancellation process.
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Certificate of Liquidation: The Department of Economic Development (DED) will issue a liquidation certificate.
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Public Notice: Publish the liquidation notice as required by law.
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Notice Period: A 45-day notice period begins, during which creditors can submit their claims.
Stage 2
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Post-Notice Declaration: After the 45-day period, submit a declaration from the liquidator to the DED stating no objections were received.
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Government Approvals: Obtain necessary approvals from relevant government authorities to cancel the business license.
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Firm Card Cancellation: Cancel the company’s firm card at the Ministry of Human Resources and Emiratisation.
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Visa Cancellations: Cancel all visas sponsored by the company.
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Document Submission: Collect and submit all required documents for final cancellation approval.
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Fee Payment: Pay all determined fees.
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Certificate of Deregistration: Receive the certificate of deregistration from the DED.
For civil works companies, the process includes additional steps:
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Cancellation Form: Fill out the relevant cancellation form.
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Firm Card Cancellation: Cancel the firm card at the Ministry of Human Resources and Emiratisation.
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Visa Cancellations: Cancel visas of all partners and sponsored individuals.
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Government Approvals: Obtain necessary approvals from government bodies.
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Partnership Cancellation Contract: Draft and notarize a contract for partnership cancellation.
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Document Submission: Submit all required documents for cancellation.
If the company plans to resume business in the future, it can opt to freeze its business license instead of terminating it. A business license can be frozen for up to 3 years after paying the freezing fee. The steps to freeze a business license include
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Freezing Request Letter: Issue a letter requesting the temporary freezing of the business license.
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No Sponsorship Confirmation: Obtain a letter from the Ministry of Human Resources and Emiratisation confirming no sponsored individuals on the license.
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DED Inspection Report: Obtain a report from the DED’s inspection division.
Role of the Liquidator
The liquidator plays a crucial role in the liquidation process. They are responsible for:
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Asset Management
We are identifying, valuing, and selling the company’s assets.
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Debt Settlement
Paying off the company’s debts and settling claims from creditors.
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Compliance
Ensuring all legal and regulatory requirements are met throughout the liquidation process.
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Reporting
We prepare and submit detailed reports on the liquidation process to stakeholders and authorities.
Liquidation Process for Free Zone Companies
When closing a free zone company, there are three primary types of liquidation:
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Summary Winding Up: Applicable when a company has no outstanding liabilities or can settle all liabilities within the next six months.
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Creditor Winding Up: This process begins with a company resolution to wind up, followed by a meeting with the company's creditors.
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Bankruptcy: Conducted through the courts under UAE Commercial Transactions Law No. 18 of 1993.
Closing a business in a free zone requires notifying local authorities, typically through the free zone’s online portal. Upon submitting a termination application, the company director's responsibilities and powers are revoked. Following verification of the application, a notice is published in a local newspaper, initiating the final termination process and issuing termination letters.
For businesses in the Jebel Ali Free Zone (JAFZA), a winding-up notification must be provided to authorities three months before starting the process. Each free zone has its own specific requirements for company winding up.
All free zones require the cancellation of visas issued on behalf of the company. Employers must provide their employees with a two-month notice period (with pay) and gratuity payments before terminating their contracts, in accordance with UAE labor laws. Employees may retain their visas if the company’s trade license remains active.
After completing these steps, companies must obtain No Objection Certificates (NOCs) from utility providers and telecommunication services. Once all necessary actions are completed, the business can close.
Importance of Hiring Liquidation Experts
Navigating the complexities of company liquidation requires expertise and a thorough understanding of local laws. Engaging with Dubai liquidation experts ensures the process is handled efficiently and complies with all regulations.
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Compliance with Dubai Liquidation Law: Dubai liquidation specialists are well-versed in local laws and regulations, ensuring your company meets all legal requirements.
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Efficient Management: Professional liquidators manage the entire process, from asset valuation to debt settlement, ensuring a smooth and orderly closure.
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Mitigating Risks: Companies can hire experienced consultants to mitigate potential risks and avoid legal complications during liquidation.
How AMCA Can Help
AMCA, a leading consultancy and audit firm in the UAE, offers comprehensive support for companies undergoing liquidation. Our services include:
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Professional Advisory
Guidance on the legal and regulatory requirements for liquidation.
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Liquidation Services
I managed the entire liquidation process, from asset valuation to final reporting.
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Debt Settlement Assistance
Helping businesses settle outstanding liabilities effectively.
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Compliance Support
Ensuring all legal, financial, and regulatory obligations are met.
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VAT and Tax Advisory
Assisting with final VAT returns and other tax-related matters.
Our team of experts is provides tailored solutions to ensure a smooth and compliant liquidation process.
Company liquidation in Dubai involves a detailed and structured process. By following the outlined steps and engaging with professional liquidation services, businesses can ensure a smooth and compliant closure. Understanding the procedures and legal requirements is crucial whether opting for voluntary liquidation or facing compulsory liquidation.
For companies looking to liquidate, partnering with Dubai liquidation experts provides the necessary support and expertise to navigate the process effectively. Each step is critical to a successful liquidation, from obtaining board and shareholder approvals to appointing a qualified liquidator and ensuring all liabilities are settled.
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