Company liquidation is the process of closing down a company. It is an event that usually occurs when a company has no money to pay its remaining debt. When the company operation ends, usually the organizational assets are distributed to creditors and shareholders, based on their priority of claims.
In general, the person who conducts the overall liquidation process is called liquidator. A liquidator is appointed by the court or the shareholders of the company, according to the type of liquidation.
Types of Liquidation
Company liquidation may be of the following two types:
1. Voluntary Liquidation
In case of voluntary liquidation, the shareholders of a company will decide to wind up the company as they have no money to pay for creditors. In this type of liquidation, priority is given to the creditors.
2. Compulsory Liquidation
Compulsory liquidation is a type of company liquidation which is put forward by court order. Here, the assets of the company are distributed to the creditors and contributors based on the priority of claims.
Role of a Liquidator
A liquidator is the chief decision maker in a liquidation process. The duties of a liquidator are as below:
1. Initiating the Winding-Up Process
Once the Board of Directors/Shareholders pass a resolution for the liquidation or winding up, and the appointment of liquidator, the liquidator, upon the receipt of such resolution, issues an acceptance letter.
2. 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.
3. 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.
4. Preparing the Statement of Affairs
As the last step in the liquidation process, the liquidator prepares the statement of affairs and the liquidator's report.
Company Liquidation Process in Dubai, UAE
Company liquidation in Dubai or the rest of the UAE comprises the following steps:
- Prepare and submit the Resolution (for mainland companies, the same needs to be notarized) and Confirmation from Liquidator (JAXA) to the licensing authority (DED/DMCC/JAFZA/DAFZA/DSO, etc.), along with payment of the required fees. [Once you have decided to wind up the company, do this as early as possible, so the licensing authority won't charge any fine for non-renewal of license (if expired, or about to expire in the near future), audit report submission, etc.]
- The liquidator has to run the liquidation advertisement in any two newspapers (1 Arabic & 1 English), and then wait for 45 days or 15 days, as the case me be, for any response
- Pay off all employee dues and cancel all the visas
- Close all the bank accounts and get a closure letter from the bank
- The company has to get a No Objection Certificate (NOC) from the Immigration Department, Ministry of Labour, Landlord/Etisalat/DU/DEWA/RTA, etc. If the licensed activity is trading, then an NOC from Dubai Customs or the Customs authorities in other Emirates is a must
- The company has to de-register with the Federal Tax Authority (FTA), if already registered, and get the de-registration Certificate from the FTA
- Once all the details are given to the liquidator, he/she shall issue the liquidator's report
- After getting the liquidator's report, submit a copy of the same, along with copies of all legal documents such as License, Share Certificate (if any), Certificate of Registration (if any), MOA, AOA, Personnel Secondment Agreement (if any), Establishment Card, etc.
- After verifying all the above documents submitted, the licensing authority will ask you to submit the originals of these documents
- Once the originals are submitted, the licensing authority shall run a newspaper advertisement for 15/45 days. After the expiry of the said notice period, and if no claims are received, they will cancel the license
Note: Steps 2 to 6 above can be carried out simultaneously.
Company Liquidation Process in Free Zones
Liquidation process for free zone companies is similar to that of mainland companies, except with regard to notice period, time frame required to liquidate the company, etc.
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
- Shareholders’ resolution
- Application form of de-registration
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 submission of documents and liquidation of the company
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.
What is the normal notice period for liquidation?
Liquidation period depends on the licensing authorities. For mainland companies, it is normally 45 days. For some free zones it is 15/21 days. There is a 45-day notice required for certain free zones like Dubai Creative Clusters Authority, etc.
Is it mandatory to publish the liquidation notice?
Yes, it is mandatory to publish the liquidation notice in any 2 newspapers (one in Arabic and the other in English).
How long does it take to liquidate a company in Dubai?
Including the notice period, it may take 60-90 days to liquidate a company in Dubai.
Does a company need to cancel all company visas during liquidation?
Yes, a company must cancel all visas and get clearance letter from Immigration Deportment to complete the liquidation process. The company has to pay end-of-service benefits and other statutory dues, such as unpaid leave salary, air ticket, unpaid salary, etc. to the employees.
Does a company need to de-register from the FTA during the liquidation process?
If already registered under VAT with the FTA, a company needs to de-register during the liquidation process.