Deregistration
The internal rules and instructions supplied by the relevant licensing
agencies usually control the deregistration requirements.
The following are the major prerequisites for deregistration in general:
- The company must pass a resolution authorizing the termination of the license and its closure;
permissions from necessary authorities
(such as the telecommunications provider, SEWA, Emirates Post, and others) will be required; and
the Memorandum of Association will be
cancelled.
- The authorities will issue a final certificate verifying the deregistration and termination of a
company's license once the completed
application (as mentioned above) is submitted with the deregistration payments.
Company Liquidation
When a corporation ends operations, all of the company's assets are
dispersed to the company's shareholders after creditors and lenders have
been paid. The process of liquidating a business, on the other hand, entails a lot more. The rules
are in place to ensure that all parties
engaged are treated equally and that no one party benefits at the expense of others.
Company liquidation can be-
- voluntary (i.e., initiated by the owners) or
- mandatory (i.e., mandated by the government) (where authorities force the business to cease
operating).
Continuous losses, a bank call on a loan, or changes in the business
environment that make the business unviable are all common reasons for voluntary
liquidation. Creditors may request voluntary liquidation under certain circumstances.
Authorities may order a company's liquidation for a variety of reasons.
When a firm's liquid finances are depleted, creditors are not paid, or the corporation
violates established laws and regulations, the company will be compelled to liquidate. Ignoring the
company liquidation requirements can result in serious
consequences for firm owners and top executives, thus it's critical to stop operations
appropriately. Designating a liquidator is the first step. The liquidator's
responsibilities are outlined in government regulations, and only approved firms are permitted to
serve as liquidators.
Company Liquidation Reasons
A corporate liquidation may be a suitable choice for a variety of
reasons, the most prevalent of which are:
- The overall debts and liabilities of your company exceed the total worth of your assets.
- Your business has gone bankrupt.
- For the first year after incorporation, your company has been unable to engage in any
trading activity.
- Your business isn't registered as a public or private entity.
- Consistent losses resulting from company operations
- Due to a lack of cashflow management, there has been a liquidity problem.
When a business begins to show signs of insolvency, an internal
audit is advised. This can assist in elucidating the reasons for a company's bad
performance.
Internal auditors look into the inner workings of your firm and recommend areas for
improvement. According to studies, firms with established internal audit
departments are 10 times stronger than those without one.
Liquidation Process for Mainland Companies
Board Resolution
Companies in the UAE frequently go into liquidation after
achieving their goal, reaching the end of their term, or losing their assets.
Liquidation is a highly simplified process that requires corporations to comply with the
necessary licensing bodies' laws.
The shareholders formally commence the liquidation process by passing a board resolution
after deciding to wind up the firm.
Review of Due Taxes
The board of directors must appoint a liquidator through a resolution. The company
liquidator, usually a reputable audit firm with
appropriate experience in the UAE, will oversee the entire liquidation process. The board's
powers are terminated after the liquidator
submits a confirmation letter and assumes control of the company's liquidation process.
Liquidator's appointment
Liquidation notification
The announcement of the liquidation must be published in two
local newspapers. The purpose of the newspaper notice is to provide debtors
a 45-day grace period from the date of publication to submit their claims.
De-registration of VAT
To properly complete the liquidation process, VAT-registered businesses must file for
de-registration. Companies must file for de-registration within
20 business days after becoming eligible for the process, according to the Federal Tax
Authority. If a company fails to de-register its VAT account
within the specified time, a fine of AED 10,000 would be applied.
Unfortunately, failing to register for VAT de-registration is a
regular mistake made by companies in liquidation, resulting in delays in the winding up
process.
Close your subsidiaries and branches
Before the board resolution is passed, shareholders must verify
that the company's branches and subsidiaries are shuttered. Because a board decision is
required for branch liquidation,
it becomes difficult for management to shut down subsidiaries and branches once the parent
business is liquidated.
UBO register submission
The Ultimate Beneficial Ownership (UBO) disclosure requirements have finally been
implemented in the UAE. Companies are required to keep a Real Beneficiary Register under UBO
requirements (RBR).
The liquidator must send an accurate copy of the revised UBO register to the registrar
within 30 days of the liquidator's appointment for companies in liquidation.
Economic Substance Regulations (ESR)
If a company is classed as 'relevant activity' [banking,
insurance, investment fund management, lease finance, shipping, holding company,
Intellectual Property (IP), distribution
and service centers], it must comply with the Economic Substance Regulations (ESR). The
liquidator should ensure that the entity is satisfying its ESR duties throughout the
liquidation process. For any period during which it engages in a relevant activity and earns
relevant money, the company in liquidation must guarantee that ESR standards are met.
Liquidation report submission
The official liquidator will submit the liquidation report to the licensing authority at the
end of the company liquidation process in the UAE. Before submitting the report, the
liquidator should double-check that the company has closed allof its bank accounts and that
all of its employees' visas have been revoked. The signature of the shareholder/director
must be included in the financial statement if the report comprises the financial statement
from the previous financial year.
Liquidation Process for Freezone Companies
There are three types of closures for free zone businesses:
Summary Winding Up
When a firm has no outstanding liabilities or is capable of
paying off all liabilities within the next six months, it can be wound up.
Creditor Winding Up
This occurs when a corporation passes a resolution for winding up, which is followed by a
creditors' meeting.
Bankruptcy
Under the UAE's Commercial Transaction Law 18/1993, the court
can carry out this form.
- A business closure in a free zone also entails alerting the local authorities. This can
be done through the internet portal of any free zone. When a company termination
application is filed,
the company director's duties, authorities, and responsibilities are also terminated. An
announcement will be published in a local newspaper after this application has been
verified. Following
that, the company's final termination will begin, including with the issuance of
termination letters.
- If your company is based in the Jebel Ali Free Zone (JAFZA), you must submit a
winding-up notification to the authorities three months before you start the winding-up
process. Every free zone has
its own set of criteria for closing a business.
- All free zones have a requirement for cancelling visas issued on your company's behalf.
Employers must also provide their employees with a two-month notice period (with salary)
and gratuity payment
before terminating their contracts. This is in conformity with UAE labour legislation.
Employees can keep their visas as long as the business's trade license is valid.
- Companies must collect applicable NOCs from utility providers and telecommunication
services after they have taken care of all of this. They can proceed with the business
closure once they have
completed all of these stages.
Documents required for Liquidation Procedure
You must first have things in order before beginning the
liquidation procedure. You'll need the following documents on hand:
- a copy of your company's license You must first renew your business license if it has
expired before you can begin the process.
- An MOA (Memorandum of Association) that includes a copy of all amendments made.
- Attorney-in-Fact (if there is any)
- Copies of all shareholders' passports are available.
- Copies of the emirates' identification cards
- Resolution of the shareholders
- Application for deregistration
Is it required to liquidate in the UAE if there are no outstanding debts?
Even if there are no debts owed to creditors, properly
liquidating a firm rather than merely letting your trade license expire is highly
recommended.
When a corporation is formally liquidated, there are a number of procedures that must be
followed. Ignoring these may result in a variety of sanctions,
as well as the 'blacklisting' of the firm, its directors, and shareholders by UAE government
authorities. This could have an impact on their involvement
in other firms or their capacity to start a new business in the future.
The Liquidation Audit
A liquidation audit is performed for a variety of reasons. It is
critical that all of the Company's assets are accounted for whenever a liquidation of the
Company is required, regardless of the reason.
Discovering and listing all of the Company's liabilities is just as critical. A liquidation
audit report will identify the Company's assets and liabilities and should eliminate any
creditors' objections.
All of the Company's assets are converted to cash and disbursed to creditors or assigned to
other Company obligations as the liquidation proceeds. The manner the assets are allocated
is governed by specific rules.
It is critical that the liquidator has access to all pertinent information. The liquidation
audit ensures that the data is correct and complete.
Following the completion of a company's liquidation, a
post-liquidation audit may be conducted to ensure that all assets were appropriately
appraised and dispersed. This post-liquidation audit report will assist
creditors in understanding what happened and how the funds they received (if any) from the
liquidation were calculated. This report will lower the likelihood of a creditor questioning
the liquidator's activities.
Why is a Liquidation Audit necessary?
Liquidation audits are required before any company can be closed
in Dubai or any of the Free Zones in Dubai. Dubai Economic Department (DED), Jebel Ali Free
Zone Authority (JAFZA), Dubai Airport Free Zone Authority (DAFZA),
Dubai Multi Commodities Center (DMCC), and Dubai Silicon Oasis (DSO) all require liquidation
audit in their respective authority regions whenever a Company is closing its operations and
canceling its license. Abu Dhabi,
Sharjah, Hamriyah Free Zone, and SAIF Zone also have regulations concerning Company
liquidation and for liquidation audits very similar to other regions within UAE. For
up-to-date information on liquidation audit, an
authorized UAE Audit Firm can be contacted to determine the actual requirements for a
specific region.
How can Dhanguard Help?
Because corporations must coordinate with a variety of external
parties/authorities in order to complete the process in a timely manner, the liquidation
process can be time-consuming and costly. Any step or document
that is overlooked will add additional time and complexity to the process. Dhanguard
provides liquidation services for all UAE entities, including LLCs, free zone firms, and
offshore companies, ranging from a full
liquidation to assisting with a section or parts of the process, depending on the client's
needs.
