UAE’s Types of Liquidation
The shareholders are the ones who start a company’s voluntary liquidation. This is usually done when a business can no longer operate profitably, even while its assets are enough to cover its liabilities. The company’s assets are liquidated by Dubai Liquidation Services, who then give the proceeds to owners and creditors. To wind down their business in a planned fashion, corporations frequently decide to go through a voluntary liquidation.
In contrast, a UAE court can order a corporation to undergo compulsory liquidation. It usually happens when companies can’t pay their bills and can’t satisfy their financial responsibilities. Creditors or regulatory agencies may submit a court petition for forcible liquidation. The procedure is then overseen by a liquidator appointed by the court in Dubai. The allocation of surviving assets to shareholders and the priority of creditor claims are outlined in the UAE Commercial Companies Law.
Depending on the company’s location, the process for a Free Zone or the mainland can be different. Below is a general overview of the liquidation process –
- Corporate Statement – An explanation of the licence cancellation should be included in a corporation statement.
- Obtain Clearance: Make sure that all required clearances are acquired from the relevant authority, which could be a bank, telecommunications firm, free zone, or Emirates Post.
- Employee Clearance – To complete the request for licence cancellation, the employees’ visas must be revoked, and any unpaid bills must be paid in full.
- Unpaid Supplier Dues – Create the audit report once all outstanding supplier payments have been paid.
- Newspaper Ad – Two daily newspapers in the area must print the advertisement for forty-five days, one of which must be in Arabic.
- Memorandum of Association – It is necessary to terminate the company’s Memorandum of Association with the jurisdiction in which the business is being performed.
- Certificate of Licence Cancellation – The authority will issue a certificate of licence cancellation attesting to the liquidation and cancellation of the licence after receiving and reviewing all supporting documentation.
Depending on the size and complexity of the business, it can cost you around AED 8000 – AED 15000.
The company’s assets cover the cost of the liquidator fee. If the assets fall short of paying the fees, the shareholders and directors must pay the fee.
The value of liquidation is estimated for plants, fixtures, real estate, inventory, and machinery owned by the firm. You can calculate the liquidation value by subtracting the company’s liabilities from its assets.