Company Liquidation

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Company Liquidation In Dubai

Company liquidation, also known as the winding-up process, is the formal procedure of closing down a company and distributing its assets to creditors and shareholders. This process can occur voluntarily or be mandated by the courts. In Dubai, company liquidation is governed by UAE laws and regulations, and the process can vary depending on whether the company is located in a free zone or on the mainland. Understanding the legal steps involved in liquidation ensures a smooth closure while protecting the company’s directors and stakeholders from future liabilities.

Types of Company Liquidation in Dubai

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Voluntary Liquidation

This occurs when the shareholders or partners of the company decide to wind up the business. The decision can be driven by reasons such as insolvency, business inactivity, or achieving the company’s objectives.

Solvent Liquidation

If the company can pay off all its debts, the liquidation process is considered solvent. The company’s assets will be distributed among shareholders after settling all liabilities.

Insolvent Liquidation

If the company is unable to meet its financial obligations and pay off its debts, it will undergo insolvent liquidation, in which creditors have a priority claim on the company’s assets.
Steps Involved in the Company Liquidation Process in Dubai:
  • Board Resolution and Shareholder Approval
    The liquidation process begins with a resolution passed by the company’s board of directors, agreeing to dissolve the company. The resolution must be notarized by a notary public.
  • Appointment of a Licensed Liquidator
    A licensed liquidator, registered with the authorities, must be appointed to manage the liquidation process. The liquidator is responsible for assessing the company’s assets, paying off debts, and distributing any remaining assets to shareholders.
  • Notification to the Licensing Authority
    The company must notify the relevant authority of its intention to liquidate. This will vary based on whether the company is located on the mainland or in a free zone: Mainland: The company must notify the Department of Economic Development (DED). Free Zone: Companies based in free zones such as the Dubai Multi Commodities Centre (DMCC), Jebel Ali Free Zone (JAFZA), or Dubai Silicon Oasis (DSO) must notify their respective free zone authority.
  • Cancellation of Visas and Work Permits
    All visas under the company’s sponsorship must be canceled, including those for employees, shareholders, and partners. The company must also cancel work permits issued by the Ministry of Human Resources and Emiratisation (MOHRE).
  • Tax Deregistration and VAT Clearance
    If the company is registered for VAT (Value Added Tax), it must apply for tax deregistration with the Federal Tax Authority (FTA). This includes settling any pending VAT liabilities, filing final returns, and requesting a VAT clearance certificate.
  • Public Notice of Liquidation
    A public notice of the company’s liquidation must be published in two local newspapers (one in Arabic and one in English). The notice gives creditors 45 days to submit any claims against the company.
  • Settling Debts and Liquidation of Assets
    The liquidator is responsible for assessing and liquidating the company’s assets. All debts and liabilities must be settled using the company’s remaining assets.
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Costs Involved in Liquidation

The cost of company liquidation in Dubai can vary depending on several factors, including the company’s size, the complexity of its financial obligations, and the fees charged by the liquidator. Key costs include:
  • Liquidator’s Fees
  • Government Fees
  • Advertising Costs
  • Employee Settlements

Conclusion

Company liquidation in Dubai is a structured process that requires careful planning, especially when dealing with regulatory authorities and creditors. Whether voluntary or compulsory, the key to a successful liquidation lies in adhering to the legal framework and working with a licensed liquidator who can navigate the process effectively. By understanding the steps involved and seeking professional guidance, businesses can ensure a smooth exit while fulfilling their financial and legal obligations.
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