Company closure in Dubai
Reliable and professional services for company liquidation in UAE. Many business owners who no longer wish to operate their businesses in the United Arab Emirates will just stop paying their trade license fees and hope to be struck off the commercial register. We provide reliable and professional services for company liquidation in Dubai.
However, this method is not correct for the closure of a license and may subject the shareholders to other serious consequences.
The partners are liable for the current debts of the establishment until the business license is officially struck off.
Article 295 of the UAE Companies Law states that an entity can be dissolved for a number of reasons including:
- The term of the company has ended,
- The purpose for which the business has been set up expires,
- The business loses a significant amount of funds,
- The entity merges with another company,
If all the partners agree to close,
- By a court order to dissolve the business establishment.
United Arab Emirates Companies Law gives various other provisions for the dissolution of an entity depending on the company type.
Company liquidation process in Dubai
Article 303 of the UAE Companies Law states that a company may be removed from the commercial register if the DED determines that a company has stopped conducting its business or that it conducts such business in contravention of the Companies Law.
In relation to the process, the DED will notify the business owner to strike off within three months from the date of the notice, unless a good reason by the company for not being struck off.
In case, the department of economic development receives a confirmation that the company’s business license is under suspension or else the company fails to provide a proper clarification for such suspension.
The matter will be then referred to the competent court to initiate the procedure to liquidate the company in Dubai.
Company Share holders’ liability in accordance with UAE companies laws shall continue as if the company has not been dissolved. As such, they will be personally liable for the business establishment.
As such, it is important for the company owners not to rely on Article 303 for the liquidation of their businesses as it led to serious consequences.
Also, the partners of the company might face a travel ban to exit the country and if exited, will not be able to return to the country, even as tourists. They might be held up at the airport for the same reason and until the debts are cleared.
How to cancel a trade license in Dubai?
If you wish to close down your business in the United Arab Emirates, the best way is to dissolve the company by agreement with all the shareholders.
It is important to ensure that there are no debts to be paid off by the business owner prior to commencing the process of winding up the business.
Once all the company’s affairs are in order, then the process for closure may start. The directors must ensure the transfer of all the assets of the company prior to company liquidation in Dubai.
Also, all business contracts must be canceled mutually by the company. The shareholders must sign a resolution stating their intention to dissolve the company. Such a resolution must be fully legalized.
The shareholders must pass a resolution to appoint auditor. Thereafter, the parties can then approach the Department of Economic Development (DED), or the free zone, to submit all the documents and pay the fees.
The company liquidation has to be advertised in local Arabic and English newspaper and must wait for a minimum of 15 days to check any financial claim from the third party.
UAE Residence Visas Cancellation Before Business De-registration:
Another important part, and most likely the costliest, is to ensure all employees’ visas have been canceled. Moreover, all their dues must have been paid.
A no objection certificate is must from the Ministry (MOHRE) to prove that there are no employees under the company.
There may be some external approvals needed depending on the business jurisdiction. In addition, all utility bills must be cleared off, and accounts with the Dubai Electricity and Water Authority (DEWA) must be canceled. The company’s fund is to be transferred prior to closing the bank account.
Please do note that each bank will have its own requirements. Therefore it would be best to clarify with the company’s own bank which documents to arrange and what the process entails for the closing of a bank account.
A final request is then forwarded to the DED upon submitting the liquidator’s report, the newspaper announcement, visa cancellation papers, NOCs from the MOHRE, bank account closure letter, as well as the resolution from the partners.
The DED or free zone will then issue a certificate of cancellation of the business license.
The above procedure may differ slightly for different types of companies. Some free zone might have their own rules for the dissolution of the entity.
New Bankruptcy Law – Company Liquidation In Dubai:
If your establishment is unable to clear its debts and wishes to dissolve for this purpose, it is essential to take into account the provisions of the new Bankruptcy Law.
The new Bankruptcy Law was introduced in December 2016 for the companies registered under the UAE Companies Law.
The old law offers few options other than liquidation to companies and was regarded as outdated. The Bankruptcy Law expressly introduces several provisions.
Companies with financial losses may now apply for restructuring and liquidation which involves a court order.
Under the previous regime, a defaulter was required to apply to be declared bankrupt within 30 days timeline. Failure to do so exposes to hefty fines and imprisonment.
This encourages many business owners to abscond, rather than try to restructure their businesses.
Now, a failure to declare bankruptcy can disqualify the debtor, but will not be regarded as a criminal offense. Moreover, the new law prevents creditors from bringing criminal charges against the companies for bounce cheques while a court order is underway.
Our View For Company Liquidation in Dubai:
It is very clear from the above that the process of closing business is time consuming and various steps are involved. The different processes will apply to different types of companies for deregistration.
It is important to follow local laws and rules while closing up your business to avoid any penalties.
There are also business advisers who will be able to assist with closing your business.