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. Conduction of the Winding-Up Process
A liquidator takes the main role in the company liquidation. He also performs such duties imposed by the court.
2. Submission of Preliminary Report
The liquidator has to submit a preliminary report to the court within 6 months after the winding-up order. In the report, he has to mention the details of issued capital, subscribed and paid, causes of the failure of the company, the estimated amount of assets and liabilities.
3. Collection and Distribution of Company Assets
Once the winding up order has been issued by the court, all the property and assets of the organization shall be handled by the liquidator. He should now collect all the assets, prepare the schedule of creditors and distribute among creditors on the basis of their claims.
4. Maintain Books
It is the duty of the liquidator to maintain the books of accounts in a prescribed manner. He has to enter the minutes of the meetings and of such matters as may be prescribed. Any creditor may check the books with the prior permission of the court.
5. Appointing the Committee of Inspection
A committee of inspection is appointed by the liquidator to assist him in the process. The committee is selected in the creditors’ meeting, held within 2 months from the court direction. The liquidator also conducts the contributors’ meeting within 14 days to finalize the members of the inspection committee.
Company Liquidation Process in Dubai, UAE
Company liquidation in Dubai or the rest of the UAE comprises the following steps:
- Relieving all the existing employees of the organization
- Getting attestation from the notary public to appoint a liquidator
- Paying a certain amount of fee to the Department of Economic Development (DED) to get a company liquidation certificate issued
- Advertising in two local newspapers about company liquidation. Once the advertisement has been published, the company is required to wait for a period of 45 days to check for any claims against the company
- Processing a claim for clearance from Dubai Electricity and Water Authority (DEWA), Etisalat, and Ministry of Labour & immigration
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 deregistration
JAXA Company Liquidation Services in Dubai, UAE
We provide the following company liquidation services in Dubai and the rest of the UAE:
- Preparing legal documents pertaining to company liquidation
- Appointing a liquidator
- Arranging for clearance certificate from the authorities
- Providing audit services for liquidation
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 happens to an employee when his/her employer company is going into liquidation?
The employee will lose his/her job. If a business is bankrupt, an employee can get assistance through the Fair Entitlements Guarantee (FEG).
What is the notice period for the liquidation of a company in Dubai?
Generally, it requires 45 days’ notice of liquidation advertisement in the public newspaper of UAE.
What are the duties of the director after company liquidation?
The director needs to provide prompt company records to the liquidator. He must also assist the liquidator in the winding-up process.