Companies may opt for voluntary or involuntary liquidation based on distinct circumstances. Financial constraints leading to an inability to sustain operations serve as a legitimate reason for voluntary liquidation. Additionally, a company might be compelled to liquidate if it engages in significant unlawful activities or violations. However, the process of company liquidation in Dubai is intricate and time-consuming. Even individuals with substantial knowledge may find the process demanding, requiring a considerable amount of time to navigate through the complexities of company liquidation in Dubai.

What is Company Liquidation?

Company Liquidation in Dubai is an official insolvency process in which a company (LL Company, branch of company, sole establishment, free zone company) stops all of its business operations, and the assets of the company are divided among creditors and shareholders. In simpler terms, company liquidation refers to the dissolving of a company. A company can choose to dissolve if it is unable to run its regular business operations.

Company Setup Consultants is a leading auditing and business consulting firm in Dubai and the UAE. With our expertise in managing the process of company liquidation in UAE, our specialists are here to simplify the task for you. We provide comprehensive company liquidation services to ensure a smooth and efficient closure of your business.

What is the Role of a Company Liquidator?

The role of a company liquidator is crucial during the process of liquidating a company. Their main responsibilities include:

1. Assessing and managing the company’s assets and liabilities: The liquidator evaluates the company’s financial situation, including its assets, debts, and obligations. They ensure that the assets are properly accounted for, valued, and sold to maximize the recovery for creditors and stakeholders.
2. Distributing proceeds and managing creditor claims: The liquidator is responsible for distributing the proceeds from the asset sale to creditors, following the order of priority set by law. They review and validate creditor claims, ensuring fair and equitable treatment in the distribution process.
3. Communicating with stakeholders: The liquidator acts as a point of contact for stakeholders, including creditors, shareholders, and employees. They provide regular updates on the liquidation process, address inquiries and concerns, and facilitate necessary documentation and procedures.
4. Completing legal and administrative requirements: The liquidator prepares and files necessary legal documents, such as the statement of affairs and final liquidators’ report, outlining the financial position of the company and the outcomes of the liquidation process. They ensure compliance with applicable laws and regulations throughout the liquidation proceedings.
5. Discharging the company’s obligations: The liquidator ensures that all outstanding debts, dues, and obligations of the company are properly addressed and settled. This includes payment of employee entitlements, such as gratuity and notice period dues.

Overall, the role of a company liquidator is to efficiently wind up the company’s affairs, safeguard the interests of creditors, and facilitate the orderly dissolution of the company.

Types of Company Liquidation

Depending on the reason behind the liquidation, there can be two types of company liquidation in Dubai. They are:

1. Voluntary Liquidation: When the company shareholders or the board of directors choose to stop the business operation and dissolve a company, it can be considered a voluntary liquidation. In a voluntary liquidation, the owners get to choose if he wants to liquidate the company or not. When a company achieves its goal, it might opt for voluntary liquidation.
2. Compulsory Liquidation: This is when a company is forced to liquidate. In case a company cannot meet its obligations, the creditors can petition the courts to liquidate the company. The creditors may choose to do this so that they can collect their investment. If the petition is valid, the court may compel the company to liquidate. Bankruptcy is one of the biggest reasons behind compulsory liquidation. Committing major crimes or infractions may also result in the compulsory liquidation of the company.

Key Steps in Liquidating a Company in UAE

1. Shareholders must pass a resolution to wind up the company
2. A liquidator (a licensed audit firm) is appointed to conduct the liquidation
3. Liquidator presents acceptance letter
4. Get resolution notarized from the  notary public
5. Submit the documents to the relevant mainland, free zone or offshore Authority
6. Publish a notice of liquidation in a local newspaper
7. Clearance from Immigration (all visas must be cancelled)
8. Clearance from Labour department
9. Clearance form Customs
10. Obtain bank account closure letter
11. Obtain clearance from RTA, Electricity & water authority, Etisalat etc.
12. Submit the final Liquidation report along with the clearance letters
13. The licensing Authority issues a cancellation certificate and removes the company from the Register

Conditions for Submitting Board Resolution

In case the shareholders are not physically present in the UAE, the resolution / Power of Attorney can be notarised and attested from the UAE embassy of the country of origin of the shareholders. It has to be attested and legalized by the Ministry of Foreign Affairs and Ministry of Justice in the UAE. The resolution must also state the name and complete address of the liquidator. However, these steps are not applicable in the case of liquidating a sole establishment in Dubai.

Special Compliance Requirements

In addition to the standard procedures, companies must assess their status whether or not they qualify to meet other compliance requirements such as:

De-registration of Value Added Tax

If a company has registered for Value Added Tax (VAT), it becomes eligible for de-registration once the liquidation procedure starts. However, many business owners forget to apply for de-registration while liquidating a company in Dubai. As per Article (14) of VAT Executive Regulations, a VAT registered company must apply for VAT de-registration within 20 business days of becoming eligible. If a company under liquidation fails to apply for VAT de-registration within the stipulated time, a penalty of AED 10,000 will be incurred. VAT de-registration is a time-consuming process, and therefore, the business owners need to prioritize this mandatory requirement while developing their exit strategy.

Maintaining Real Beneficiary Register

A company under liquidation is obliged to meet the requirements set out in the Ultimate Beneficial Ownership (UBO) law. As per Cabinet Resolution No. (58) of 2020 on Ultimate Beneficial Ownership, a company undergoing liquidation should hand over the Real Beneficiary Register and Partners and Shareholders Register, if any, or a true copy to the Registrar within thirty days from the date of the liquidator’s appointment.

Further, the company administrators or the liquidator must maintain the Registers for a period of at least five years from the date of liquidation. In the wake of the new regulations, the liquidator assumes a greater role here and therefore availing reliable company liquidation services in Dubai becomes imperative.

ESR Notification, Report Filing Before Liquidation

With the introduction of Economic Substance Regulation (ESR), the compliance burden of companies under liquidation has increased. If a company is carrying out any Relevant Activity during the course of the winding-up process, the liquidator should ensure that the firm meets all relevant ESR obligations.  The company must file ESR annual ESR notification, submit ESR Reports and should meet the Economic Substance Test for any period during which it carries on a Relevant Activity and derives Relevant Income. As non-compliance will result in penalties, it is better to consult with approved company liquidators in the UAE well in advance.

Explore Effortless Company Liquidation with Gulfpro Accountants

Navigating through the intricacies of company liquidation in Dubai demands a strategic approach, and Gulfpro Accountants stand ready to assist you. As an established partner, we understand that the evolving compliance landscape, particularly related to Economic Substance Regulations (ESR) and Ultimate Beneficial Owner (UBO) requirements, has added complexity and time to the liquidation process.

Key Considerations for Streamlined Company Liquidation:

ESR and UBO Compliance: The ever-changing regulatory environment necessitates a thorough understanding of ESR and UBO compliance during the liquidation process. Our expertise ensures that all requirements are met seamlessly.

Strategic Planning for a Smooth Exit:

Embarking on the journey of liquidating a company becomes more efficient when planned alongside the initial stages of business formation. Gulfpro Accountants advocate for strategic planning to streamline the liquidation process.

Comprehensive Services for a Hassle-Free Closure:

Gulfpro Accountants takes on the responsibility of addressing various requirements associated with company liquidation, including:

• Visa cancellations
• ESR filing
• VAT de-registration
• Maintenance of the Real Beneficiary Register

Why Choose Gulfpro Accountants for Company Liquidation?

Our commitment is to alleviate the strenuous aspects of closing down a company in the UAE for investors. With a dedicated focus on compliance, strategic planning, and a comprehensive service approach, Gulfpro Accountants ensures a smooth and hassle-free company liquidation experience.

Looking for Assistance with Company Liquidation in UAE? Send Us Your Inquiry.