The United Arab Emirates is gradually transforming into a very attractive location for budding entrepreneurs and businesspeople to set up their business. The various benefits such as quick and easy business formation, tax-free regulations, business-friendly environment, etc. provide a very lucrative opportunity for them to pass. This has resulted in an upsurge in the number of companies in the UAE.
Even with the benefits mentioned above sometimes business is unable to succeed in the business environment and slowly gets faded away. If this condition is not rectified, then you may have to liquidate the company. Let’s understand the term “Liquidation” and what are the primary roles and duties of a liquidator.
What is Liquidation of Company?
Liquidation is an insolvency procedure in which the company ceases all its business activities, and then the assets of the company are utilised in the clearing of all the dues of the company to its creditors and various lenders. If even after paying the creditors’ a positive balance is left, then the remaining assets are distributed among the various shareholders of the company. A company has to undergo the procedure of liquidation if it has been determined that the business no longer possess the resources to continue its workings.
Types of Liquidation
In the UAE, there are two different ways of liquidating a company.
When the owner or the shareholder of the company are convinced that the business would not be able to continue its activities properly in the future, they would call for a meeting for the disbanding of the company and choose a liquidator.
This kind of liquidation is not under the control of the owner or the shareholder but happens when the court of law itself orders for the company to be liquidated. Compulsory liquidation usually occurs when the company, time and again, fail to repay the creditors and these creditors request for the settlement of the company.
Who is a Liquidator?
When a company is unable to create a name for itself in the market and is unsuccessful in its business venture, then it decides to undergo a winding-up process also known as liquidation. A liquidator is a person who is appointed by the shareholders or the owner and is experienced in handling the winding up of a company by selling off its assets. A liquidator should accumulate all the assets of the company and settle all the debts of the company. If still any asset is left after the settlement, then it would be divided among the various shareholders.
Duties of a Liquidator
There are numerous roles and responsibilities that a liquidator should perform so that he could successfully manage the winding up of the company. A list of tasks and duties are stated below:
- The liquidator, first of all, needs to take an inventory of the assets and liabilities of the company. For this, he can ask for the help of the owner or the manager.
- To make the process easier, the liquidator can open a bank account in the name of the company so that he could deposit any funds which he can reclaim by selling off the assets of the company.
- The liquidator needs to give priority to certain outstanding debts before dividing the assets between the various shareholders such as employees’ salary, repaying of any loan taken, etc.
- In case the company has only a single owner, and some of the assets are remaining after all the debt is paid, then the liquidator should not give the remaining balance to the owner.
- If any litigation is filed against the company that is going through liquidation, then the liquidator has the responsibility of representing the company in the court of law.
- If the profit accumulated after selling all the assets of the company are not enough to repay all the outstanding debt of the company, in such a case the remaining debt would be divided among all the partners. If there is only a single owner, then he will have the responsibility to repay the loan which the company took.
- After performing all the necessary procedures, the liquidator should present a final report declaring all the assets and the settlement of the liabilities. After this, it will be the duty of the liquidator to request the removal of the company from the commercial register.
These are some of the duties and responsibilities of the liquidator which should be performed by him without any fail. Performing all these tasks would make the liquidation process easier and without any hassle.
The various tasks performed by a liquidator are not easy and would require a lot of effort and resources to perform. This stands as one of the reason why it is recommended that you hire the services of a firm that would provide company liquidation services.
JAXA is a reputed chartered accounting firm which provides company liquidation services and will help you to focus more on your current business project by taking over all the responsibilities of a liquidator. It also provides many other services such as audit and assurance services, tax services, payroll services, etc. For more details about the various other services we provide, do contact us – we would be happy to help.