The birth of a business entity is the execution of the idea that an entrepreneur holds. An international business platform that motivates such ideas to mold into reality is Dubai. Multiple free zones and segments have been built accordingly to provide flexibility to every business entity to initiate their business ideas. One such free zone that uplifts the technology industry is Dubai Silicon Oasis.
Now, establishing a business successfully involves uncountable risks and scenarios which the entity must overcome in the changing business climate. If not, the downfall phase for the company starts, and continuation of this phase for a long time gives birth to the liquidation or wind-up process. This article will give a clear picture about company liquidation, its signs, and its process that one should be aware of while continuing a business in Dubai Silicon Oasis. Let’s start…
What is Liquidation of a Company?
Liquidation of a company is a process where the life of a business entity comes to an end. It is to be kept in mind that a company has no debt or obligations towards any government or private firm. The assets of the company will be transferred to the shareholders wherein the company will appoint a liquidator to carry out the process. Here are a few early warnings of company liquidation:
Early Warnings of Company Liquidation
- Company cash flow problems
- Maximum borrowing
- Creditors end up issuing wind-up petition
- Late payments to debtors
- Loss of major contracts
- Continuous profit decline
Now, when it comes to company liquidation, there exist different types.
Types of Company Liquidation in Dubai
1. Voluntary Liquidation
Here, the liquidation process is initiated by the directors or owners as they fail to pay their creditors.
2. Compulsory Liquidation
Here, the decision is forced by creditors, and is done usually after the approval of wind-up petition in the court.
Steps of Company Liquidation in Dubai Silicon Oasis
- Submit a notice to DSO Free Zone Authority stating the reason behind the closure
- A board resolution for de-registration must be attached
- Company License, Certificate of Formation, Share Certificates, Lease Agreement needs to be canceled
- Company keys must be returned
- Clearances from the following authorities are mandatory:
- Dubai Electricity and Water Authority
- Customs Department
- DSO Finance Department
- DSO Government Services Department
- DSO IT Department
- Etisalat Clearance
- Facilities Management Clearance
- It is required that the liquidation report be prepared by a Dubai auditor only
Now, as mentioned earlier, the trade or business license of a company also needs to get cancelled. Let’s understand the process of trade license cancellation.
Trade License Cancellation in Dubai
When a business entity takes a step forward towards the winding up process, it becomes essential that the company gets its name wiped out of the Dubai Trade Register and cancel the trade license. To take this process into execution, the below-mentioned documents will be filed:
- Final account statement related to the assets approved by the shareholders
- A No-Objection Letter issued by the Ministry of Labor that states the approval of license cancellation
- Company dissolution Statement along with the liquidator’s nomination
- Visa revocation process needs to be initiated for the foreign partners
Thus, you can see that the liquidation process involves innumerable tasks to be performed. Starting from the distribution of company assets, to acquiring the clearances can be a tedious process. At this point, a liquidator can definitely ease out the process since they are well-versed with the entire process. JAXA serves to be one of the top auditors in Dubai. We look into the matters of company liquidation, incorporation, tax, audit, accounting processes for our clients. To initiate the liquidation process for your company, do not hesitate to speak our business experts. They will guide you and help you in clearing the proceedings hassle-free. Contact us today to know more.