Company liquidation Dubai is a process that includes closing a business by selling off its assets, canceling all licenses and visas, settling debts, deregistering with relevant authorities, and dissolving the company. If you own a company in the UAE, you just can’t simply shut the doors and walk away. The formal way of company liquidation involves selling off the assets and settling any outstanding debts. The company will distribute any remaining funds among the shareholders.
Once all the shareholders decide to liquidate the company and the liquidation process is complete, the company can no longer operate, cannot hire new employees, and its trade history will be removed, effectively erasing the company’s name. As a result, the name will be available for others to register as their own company.
What is Company Liquidation?
What Is the Liquidation of a Company? By Law, company liquidation is the process of shutting down a company, either by the owner’s choice or by force of the authorities. Company Liquidation involves selling off a company’s assets and settling its debts to pay creditors, banks, or any outstanding loans that the company has incurred.
This process usually has two reasons.
- When the company can’t pay its debts.
- When the owners choose to shut it down.
When the company cannot pay its debts
When the company lacks a solution for paying its debts, meaning it has insufficient funds to pay bills and employees, it often leads to the liquidation of companies in Dubai. At this point, businesses can’t continue their operations. Liquidation is the legal process announced by the authorities to formally close the company, selling off its assets and using those funds to pay back creditors as much as possible.
When the owners choose to shut it down
The owner’s request can also initiate company liquidation in Dubai. Sometimes, business owners decide that it is the right time to close their business not because of financial struggles but because they have other plans. It could be due to market trends or the different interests of the owner, who wants to liquidate the company. It also means that the owner will settle all remaining bills, cancel licenses, and distribute the assets that belong to the shareholders.
A Complete Guide to Company Liquidation in Dubai
Closing a business in Dubai is not just closing out the shop and walking away. There are ways to follow that can help you close your business. Below, we will discuss all the steps.
Decision to liquidate – Company Liquidation in Dubai
There are two types to close your business. Number one is voluntary liquidation, in which the owner agrees to close the business. On the other hand, the alternative is liquidation by force; in this situation, the company cannot pay its debts, so that the authorities will liquidate it forcefully.
Shareholders Approval – Company Liquidation in Dubai
In this process, the owner will conduct a meeting with all shareholders and lead a vote to liquidate the company. It ensures that every shareholder is on the same page and can put aside any conflict after the company’s liquidation.
Appoint a Liquidator – Company Liquidation in Dubai
After deciding to liquidate the company, who will handle all the mess? You need to hire a licensed liquidator who is an expert in selling off company assets, paying all outstanding debts, and handling the necessary legal paperwork.
Notify Creditors & Settle Debts
After selling off the assets, you need to pay who you owe. The Liquidator will contact all creditors like banks, suppliers, and employees. You will use the money you get from selling off assets to pay employees, government dues, banks, and loans.
Cancel Licenses & Visas
After settling all debts, you need to deregister your company with the government. The DED or free zone will cancel the trade license. The company will terminate the visas of all employees during this process. Afterward, you will need to close the company’s bank accounts and settle any outstanding fees.
De-register from Authorities
The Company Liquidation process involves removing the company from the Chamber of Commerce Dubai records. You must cancel your VAT registration if applicable to your company. Any Labor permits or immigration documents also need to be cleared.
Final Approval & Company Dissolution
After carefully following the above process, the Liquidator will submit the final report to the authorities. After submission, the Dubai Court or Free Zone Authority will issue a liquidation certificate. The company will be legally dissolved and no longer exists.
How Much Does It Cost to Close a Business in Dubai? – Company Liquidation in Dubai
The liquidation of a company in Dubai isn’t free, and you can’t walk away from this. The cost will vary with the size of your company. Here are the details that you need to know:
Liquidator’s Fees
You will need a liquidator to handle all your legal processes. Their fee may vary from a few thousand AED to much higher, depending on the company’s situation.
Government Paperwork Costs
De-registration from DED or Free Zone will incur administrative fees.
Legal Expenses (If Needed)
If there are disputes with creditors or any other legal issues in which lawyers may become involved, it’ll add to the expense.
Paying off Debts
If your company had loans from banks or suppliers that you can not settle by selling off assets, it’d add more expense to your pocket.
Taxes When Closing a Business in Dubai: What You Need to Know?
Looking to Liquidate your company in Dubai? The UAE doesn’t charge corporate income tax for most businesses; however, there are still a few tax-related matters that you need to address.
VAT (If Registered)
If your company is registered for VAT, you are required to settle the outstanding VAT dues. File the VAT returns and deregister your VAT number before closing out.
Other Unpaid Taxes
Do you have any pending customs duties or any other government fees? You need to clear them out before you can move on from this company.
Final Tax Filings
Until the process of your company’s liquidation is complete, you need to submit tax paperwork.
Why is a business liquidated, and who receives the payment? – Company Liquidation in Dubai
There are two possible reasons for the business getting liquidated. First, it is by the choice of the owners and all shareholders; second, it is by force. Regarding the first reason, the owner may have other plans for the future, despite this business still generating a profit, but he decides to close it down. On the other hand, discussing the closure of the company by force could mean the business is incurring a loss, which may lead to its closure by the officials.
When the business closes, it uses the proceeds from selling its assets to settle debts with creditors and banks, as well as to pay any outstanding fees or penalties. If the company still has money after paying all these expenses, it will divide the remaining amount among all shareholders.
Endnotes
In conclusion, liquidating a company in Dubai requires proper legal financial handling, from debt settlement to license cancellation. A professional liquidator ensures compliance with free zone or mainland regulations, manages financial affairs, and collaborates with relevant authorities.
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