Company Liquidation in UAE

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 UAE.

Company Liquidation In UAE

However, this method is not correct for the closure of a license and may subject the share holders to other serious consequences.

The partners are liable for 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 dissolve 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 dissolution of an entity depending on the company type.

Company liquidation process in UAE

Article 303 of the UAE Companies Law states that a company may be remove from the commercial register if the DED determines that a company has stop to conduct its business or that it conducts such business i 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 strike off.

If the Ministry of Economy or the DED, receives upon the expiry of the three months, a confirmation that the company’s business is still under suspension or if the company fails to provide a proper justification for such suspension.

The matter will be then refer to the competent court to initiate the procedure to liquidate the company.

Company Share holders’s 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.

Therefore, it is essential for business owners not to rely on Article 303 for the dissolution of their businesses as it carries some serious consequences.

Further more, such partners of a company might face a ban if they exit the country and ever decide to return back to the country, even as a tourist. They would be held at the airport until all debts have been cleared.

If you wish to close down your business in United Arab Emirates, the best way is to dissolve the company by agreement of all the share holders.

It is important to ensure that there are no debts to be pay 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 closure.

Also all business contracts must be cancel mutually by the company. The share holders must sign a resolution stating their intention to dissolve the company. Such a resolution must be fully legalise.

The share holders must also appoint a liquidator in the same resolution. There after, the parties can then approach the Department of Economic Development (DED), or the free zone, to submit all the documents and pay the fees.

A public announcement to declare via a newspaper for an average of 45 days for the purposes of providing more time for creditors to come forward.

Another important part, and most likely the costliest, is to ensure all employees’ visas have been cancelled. 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.

Further external approvals may be require depending on the business license. In addition, all utility bills must be cleared off, and accounts with the Dubai Electricity and Water Authority (DEWA) must be cancelled. The company’s fund to be transfer prior to close the bank account.

Please do note that each bank will have their own requirements. Therefore it would be best to clarify with the company’s own bank which documents to arrange and what’s the process entails for closing of a bank account.

A final request is then forward 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.

If your establishment is unable to clear its debts and wish to dissolve for this purpose, it is essential to take into account the provisions of the new Bankruptcy Law.

The new Bankruptcy Law introduced in December 2016 for the companies register under the UAE Companies Law.

The old law offers few options other than liquidation to companies and was regard as out date. The Bankruptcy Law expressly introduces several provisions.

Companies with financial losses may now apply for restructuring and liquidation which involves a court order. This law also replaces several bankruptcy related crimes under the UAE’s Penal Code.

Under the old regime, a defaulting debtor was required to apply to be declare bankrupt within 30 days. Failure to do so expose to hefty fines and imprisonment.

This encourage 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 regard as a criminal offence. In addition, the new law prevents creditors from bringing criminal charges against the companies for bounce cheques while a court order is underway.

The new Bankruptcy Law paves the way for companies struggling to pay and offers suitable options.

It is clear from the above that there are various methods available for business owners to close down their companies. Different process will apply for different types of companies.

It is essential to follow the relevant rules when winding up your business in order to avoid facing hefty penalties.

There are also business advisers who will be able to assist with closing your business. Otherwise, the authorities themselves can provide some advice as to the best ways to dissolve your business.

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