Liquidation of a Company in UAE

Liquidation of a company is a process through which a company de-register their license from the respective license issuance authority. This process provides a de-registration certificate to the shareholder of the company and legally announces the successful wind-up of the company.

Why a company goes for liquidation?

A company dissolution can become necessary for many different reasons: A new company formation evolves a complete process to gain a legal license to carry on the business process in the related jurisdiction. Also there can be several permission from different related authorities while operating the business like municipality, custom, Ministry of Economy, Any specific skill related authority. Hence while forming a company it is important to understand the reasons which can consequence in closure of a company and also its process and cost and charges.

The reasons for a company liquidation can be mentioned as below:-

1. End of the objective of the existence of the company
2. Shareholders decided to be part ways
3. Lack of desired results
4. Less working capital for the company and many more

Steps to liquidate a mainland company

A mainland company liquidation takes approx. 10-60 days depending on the legal formation of the company and needs to go through different steps as mentioned below:-

Appointing an auditor

• De registration of VAT (If the company is VAT registered)
• Applying to the license issuance authority for the deregistration of the license with the presence of all the shareholders or the POA holder
• Publication of the liquidation in 2 different local newspaper (if legal type is LLC)
• All the visas under the company have to be cancelled
• Clearance certificate from the landlord, all utility related authorities
• Bank closure letter
• Clearance letter from related authority like custom, municipality etc (if required)
• Clearance letter from the immigration authority and labour department
• Submission of all the clearance confirmation from different authorities to the license issuance authority
• Payment of the amount and getting de registration certificate

Cost and charges

The cost and charges can be somewhere in between AED 8000 to 12000 or more than that depending on the structure of the company.

A freezone company liquidation

Though different freezones are having their set of different requirements for the company liquidation yet all of them needs almost the below mentioned documents:

• Bank Closure Letter
• Board Resolution for company closure
• Signature on the related formats for the company liquidation by authorized signatory or POA holder
• Submission of all the company original documents
• Cancellation of all the visas under the company
• De registration of VAT
• Publication in local newspaper (if applicable)
• Presence of all the shareholders (depending on that particular freezone requirement)

Cost and charges

A Freezone liquidation cost can be around AED 2000/- and the visa cancellation cost for each can be around AED 1200/-.Also the E channel registration refundable amount is needed to be received after completion of the liquidation. The cost can vary based on different freezone authorities.

Offshore Company Liquidation

Jebel Ali offshore, RAK OFFSHORE and AJMAN OFFSHORE all of these 3 offshore liquidation needs the below mentioned documents

• Bank Closure Letter
• Auditor report
• Board Resolution for company closure
• Signature on the related formats for the company liquidation by authorized signatory or POA holder
• Submission of all the company original documents
• Presence of all the shareholders (depending on that particular offshore requirement)

The cost of the license liquidation may vary. The license cannot be liquidated in JAFZA offshore if the license is not active and hence one needs to renew the license first and then the liquidation needs to take place. Options other than liquidation Freezing of a License in Mainland If a company is facing any of the reason which is leading the company’s future towards a liquidation but still the shareholders want to keep the license for few years and then want to liquidate in that scenario the shareholders may choose to freeze company. The freezing of a license needs the closure of the bank account and cancellation of all the visas from the company and only keeping the license in inactive mode maximum for 3 years. After 3 years the shareholder can take a decision to either renew or liquidate the license. Strike Off in Offshore The strike off of a company takes place by the related offshore authority if the company hasn’t been renewed for a longer time for 6 months or more than that. Though such decision depends only on that related authority. Also in this situation the company will not be getting any deregistration paper. The strike off company can re-activate themselves after taking an approval from the authority and after paying the penalties they have made for remaining in active.Hence it is always advisable to go for a complete liquidation rather than being struck off by the authority. This blog is written by Ms. Ananya Mukherjee, Business Advisor at Flyingcolour Business Setup, VAT and Accounting Services, Dubai. If you have any question regarding liquidation of a company in UAE then please contact us at +971 4 4542366 or email us at info[at]flyingcolour[dot]com. *Please Note: This article was published on 31st December, 2020. The information provided in the article is based on the policies and rules applicable at the time of writing it. Talk to one of our consultants for any recent update or change.