Why is liquidation required?
The original purpose for setting up of the company is fulfilled and the entity is no longer required;
The company is considered to be insolvent.
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Types of liquidation
Voluntary Liquidations – Shareholders of a company may elect to liquidate a solvent company or the directors of an insolvent company may choose to cease further trading and liquidate its assets in order to pay its creditors.
Compulsory Liquidations: If a company’s debts are not paid on time, creditors may request the courts to liquidate the company in order for them to collect their dues. The courts may decide to force a company to liquidate and sell its assets in order to pay outstanding debt.
Is liquidation necessary in the UAE even if there are no outstanding debts?
What is the role of a liquidator?
The liquidation process in the UAE
The type of ownership
The type of liquidation
The jurisdiction of registration, whether mainland Emirates or free trade zone.
Preparation and approval of shareholders’ resolution of dissolution. The resolution must be attested by Notary Public in the case of Limited Liability Companies (LLCs) registered in the UAE. If the shareholders are not available in the UAE, then the resolution must first be notarised and attested at the relevant UAE embassy and then attested at the UAE Ministry of Foreign Affairs and Ministry of Justice. Free zone companies do generally require attestation by Notary Public.
Appointment of a liquidator and collection of an official acceptance letter from the liquidator;
Submission of the shareholders’ resolution, along with mandatory documents and required fees, to the relevant licensing authority, including:
- Copy of the company’s Trade Licence
- Copy of the company’s Memorandum of Association
- Powers of Attorney (if any)
- Copies of passport / Emirates ID for all partners, owners and shareholders
- Deregistration application form.
Once a provisional liquidation certificate is issued, the company can proceed to publish a notice of liquidation in a public newspaper, in English as well as Arabic (two to four notices may be required depending upon the registered authority);
A notice period of up to 45 days may be required (depending upon the jurisdiction of registration);
During the notice period, the following actions can be undertaken.
- Cancellation of work permits and visas for all employees and partners
- Clearance letter from Immigration Department
- Clearance letter from Labour Department
- Clearance letters from utilities companies – water, electricity and telecoms
- Clearance letter from leasing entity (landlord)
- Clearance letter from Road & Transport Authority (RTA) for any registered vehicles
- Clearance letter from Federal Customs Authority (FCA)
- Bank account closure letter
- VAT de-registration and VAT clearance letter from FTA
Once the notice period is over, the liquidator can prepare the Liquidation Report.
The completed Report with all the accompanying documentation should then be submitted to the relevant Authority along with the required cancellation fees.
The Authority will review the submission and, if approved, will issue a ‘Licence Cancellation Certificate’.
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