Liquidation Process in Mainland Companies in UAE

A mainland company in the UAE may liquidate from compulsion from its creditors (compulsory liquidation) or because the shareholders decide to do so (voluntary liquidation). Irrespective of the nature of its business or type of organization, mainland companies must follow the necessary process and rules of the UAE Government concerning the liquidation process of mainland companies in the UAE.

What is Liquidation of a Mainland Company in UAE?

By liquidating a company, we mean the dissolution, closure, or winding up of a mainland or free zone company, which could be an LLC or a subsidiary or branch of another company or a sole proprietorship. The process involves shutting down operations and sharing the organization's assets with its shareholders or creditors.

Who Needs a Liquidator?

If your organization's legal structure is one of the following, you must appoint a liquidator:

• Partnership (General and Simple Limited)
• Limited Liability Company (LLC)
• Joint Stock Company (Public and Private)

Liquidation Process in Mainland Companies in the UAE

Let us discuss the liquidation process in two phases. The procedure applies to all companies except civil companies.

Phase I

In the first phase, the mainland companies must follow the procedure stated below:

• Prepare notarized general assembly minutes certifying the company's dissolution and liquidator appointment.
• Secure an authorized letter of acceptance from a registered liquidator.
• Fill out the relevant form and submit it to the Directorate of Residency and Foreigners Affairs (DED) or other authorized channels to request cancellation.
• DED will issue a certificate of liquidation.
• At least two newspapers must publish the liquidation notice.
• The notice provides debtors 45 days from issuance to submit their claims.

Phase II

• Submit the liquidator and partner's declaration letter that no one has objected to the dissolution of the company within the stipulated time to DED.
• Collect the necessary clearances from various government agencies for license termination.
• Cancelation of the company card at the Ministry of Human Resources and Emiratisation (MHRE).
• At the respective General Directorate of Residency & Foreigners Affairs, cancel the company-sponsored foreign partners' visa.
• To receive the approval and fee structure for dissolution from the DED, you must submit all the above documents.
• Issue of deregistration (cancellation of license) certificate on making complete payment.

How to Freeze a Trade Licence? 

Companies in Dubai can keep their trade licenses dormant for only three years by paying a charge, but they cannot extend it beyond that time frame. If you do not want to terminate your trade license, you can use this feature.

Conclusion

Liquidation formalities for mainland business entities become necessary for two reasons. Your business license will need renewal in due time, and if the authorities are unaware of the closure, they will levy fines for non-renewal of the license. That will result in unnecessary complications and expenses. Also, if the business has dues, you need to settle the creditors by paying them off or distributing the assets or proceeds from their sales. Finally, in the case of companies, you need to share the assets and properties of the company among its shareholders. Flyingcolour can assist with all formalities and obtaining clearances from the various administrative houses concerning the dissolution of your company in the mainland of UAE.