Voluntary liquidation in the UAE is a step-by-step approach for business owners to shut down their company. Shareholders decide if they want to voluntarily shut down the business to manage its wind-up responsibly, including settling any debts and distributing any remaining assets among themselves. Companies typically enter into voluntary liquidation for a number of reasons to close down their business in the market. In a voluntary liquidation, business owners do not have to go through the courts to shut down the business and do it on their own terms.
The process allows for the interests of creditors, employees, and shareholders to be taken into account. Once the liquidation is complete, the company’s license will be cancelled and its name will be removed from any registered documents, thereby formally terminating the company. The process outlined in the regulations allows business owners to wind up their company smoothly with the least amount of disruption, while protecting the company’s reputation and allowing owners to move on without consequences.
Types of Voluntary Liquidation in the UAE
Voluntary liquidation in the UAE offers a path for companies to cease their business operations in an orderly manner while meeting all legal and financial obligations. When the owners are not interested in continuing to operate their company, they may choose to dissolve the company voluntarily, rather than waiting for external pressure from creditors or courts. The act of voluntary liquidation provides a process to settle debts fairly, distribute assets properly, and wind up the business without further complications. The manner for undertaking voluntary liquidation in the UAE will turn upon the company’s financial status, and there are two principal forms of voluntary liquidation in the UAE.
Members Voluntary Liquidation
Members’ voluntary liquidation is the first option used when a company is financially solvent and is capable of settling all of its debts. Members will consider and proceed with members’ voluntary liquidation once the company has fulfilled its purpose, where the owners of the business are retiring, or because, in order to restructure, it is best to close the business. The directors will prepare a declaration in support of solvency, followed by the shareholders passing a resolution to appoint a liquidator licensed to complete the necessary processes to settle the business liabilities and distribute any remaining assets to the members.
Creditors Voluntary Liquidation
The creditors’ voluntary liquidation process takes place when it is apparent that the company cannot pay its debts. In such cases, the directors and shareholders will decide to appoint a liquidator and ultimately wind down the operation of the company for the creditors. A meeting will be held with creditors to review the financial position of the company and approve the appointment of a liquidator. A creditors’ voluntary liquidator also takes care to maximize approval and satisfaction amongst creditors whilst undertaking the proper manner of closing down the company.
The Voluntary Liquidation Process in the UAE
In the UAE, the voluntary liquidation process is a formal legal procedure that allows company owners to close their company in an orderly and transparent manner. The process ensures that all debts are settled, all assets are properly accounted for and distributed, and that the company is officially removed from the company trade registry. Additionally, it will assist in providing peace of mind to shareholders, creditors, and employees that the process follows UAE law. To achieve an orderly wind-up, there are specific steps involved that must be carefully completed with the assistance of a registered liquidator.
Board Resolution and Shareholders Resolutions
The process starts with the board of directors of the company passing a resolution to the effect of voluntary liquidation, and then the shareholders passing their own resolution confirming the voluntary liquidation.
Licensed Liquidator Appointment
A licensed liquidator is then appointed to manage the entire process and its nuances. The liquidator guides, amongst other things, the asset valuation, best repayment, and any liquidation and division of funds, and the accuracy of the process with the rules and regulations set by law.
Advertised Notice of Liquidation
Then a notice of liquidation is published in at least two local newspapers for creditors to provide around 45 days for them to present any claims against the company.
Paying off Debts and Liabilities
The authority works to get rid of all bills, including creditor bills, employee costs, and future government obligations. Once all bills are cleared, the liquidator can turn their attention to the remaining assets.
Distributing Remaining Assets
Once debts are settled, the remaining assets are distributed amongst the shareholders, proportional to the ownership of shares.
Final Audit and Deregistration
The liquidator produces a final audit report and submits it to the relevant authorities. After it is approved, the company formally cancels the trade license, and the name is officially removed from the trade registry. That ends the legal life of the business.
Advantages of Voluntary Liquidation in the UAE
Voluntary liquidation in the UAE is not just about shutting down a business. It’s largely responsible and organized in an orderly way. By following the last act in closing down their operations, a company protects the interests of shareholders, creditors, or its employees. It allows the owner to wind up business activities without having unresolved financial or legal issues. Many advantages indicate that voluntary liquidation should be a good choice instead of continuing activities for a company.
Controlled and Organized Closure
One of the key advantages is the freedom for owners to control the timing and process of closure. By taking charge, they can minimize disruption and put operations to a smooth conclusion.
Fair Debt Settlement
Voluntary liquidation is the process through which debts are paid off in a regulated way. Creditors get the fair treatment they deserve, and it also helps keep trust in the business free of unnecessary complications.
Legal Protection
Procedures followed correctly protect directors and shareholders against future claims. It protects them from legal issues about pending liabilities.
Preserving Business Reputation
Voluntarily deciding to liquidate shows accountability and professionalism. Closing openly, companies ensure good relations with stakeholders and uphold their reputation within the market.
Tax Compliance and Benefits
The tax liabilities are settled in full at the time of liquidation, thereby enabling owners to avoid penalties and maintain compliance with the UAE law. In certain situations, it also results in financial benefits by avoiding further liability.
Why Choose Al Riyady for Voluntary Liquidation?
Liquidating a company voluntarily in the UAE is not simple without support. At Al Riyady, we simplify the entire process for you, ensuring clear information and support along the way from passing the first resolution until deregistration. You may relax as our experts take you through all the steps, including legal compliance, settling debts, and tax clearance, which will lead you to a stress-free company closure.
Conclusion
Through voluntary liquidation, companies in the UAE can exit the company in a determined and professional manner while observing all obligations. It equally helps to safeguard their reputation, ensure that debts are paid, and allow shareholders to move on without any further hassles. Any company can exit the market smoothly and responsibly with the proper protocols.
