Company liquidation is a formal insolvency procedure in which a company is wound up (also known as "winding up" or "closing" a company); all its assets are liquidated; and the proceeds from the sale of assets are used to settle debts, pay expenses, and distribute any remaining balance to the company's shareholders.
When a company is liquidated, it ceases to operate and employ people. A company's business license is revoked upon liquidation, its name is removed from the Trade Registry, and the entity is considered to have ceased to exist.
Even if there are no creditors to pay, it is far better to formally liquidate a company rather than simply letting your trade license expire. When a company is officially liquidated, several procedures must be followed. Ignoring these may result in various penalties, as well as the 'blacklisting' of the company, as well as its directors and shareholders, by UAE government authorities. This may affect their involvement in other businesses or their ability to establish another company in the future.
According to UAE laws, there are two forms of company liquidations: voluntary/compulsory liquidation and winding up/liquidation by the court.
Companies may choose to be liquidated voluntarily. Adopting a legally binding shareholder resolution will start this process by the company's shareholders or creditors. A firm may submit a petition for winding up with the court when its financial system fails, the company is in financial distress, and/or the company becomes insolvent and is unable to pay its debts.
The liquidation process will differ depending on the three criteria listed below:
It is to be noted that when officially liquidating a business on the Mainland, all business partners must be present in the country (or their Power of Attorney must be approved and attested to act to sign the shareholder resolution to close the company). Follow these steps after filing a cancellation request with the Department of Economic Development (DED).
There are two steps in the process of canceling a trade license.
Once all of the preceding steps have been completed, you can apply for a confirmation certificate proving the company's license termination and de-registration.
Liquidation is a difficult process. When a board of directors opts to liquidate a company, they do so with minimum liability or minimal risk, but only if the process is carried out properly and promptly.
We, the Emirates Charted Accountants Group (ECAG), can make it smooth for you when your company undergoes liquidation. As company liquidators in Dubai, we also offer a variety of solutions to clients in various sectors due to our decade of experience and expertise in operating confidentially and handling appropriately. We are experts in preparing documents and obtaining approvals and clearances. Our experience is an assurance in itself that we can provide you with the quality service that you need. In addition, we aim to provide you with transitional solutions and help you focus on new opportunities. So, Act now.
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Mr. Ragesh Mattummal | Partner
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