Company Liquidation Services

Liquidation is the process in accounting by which a company is brought to an end. The assets and property of the company are redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation. Liquidation may either be compulsory (sometimes referred to as a creditors’ liquidation following bankruptcy, which may result in the court creating a “liquidation trust”) or voluntary (sometimes referred to as a shareholders’ liquidation, although some voluntary liquidations are controlled by the creditors).

The term “liquidation” is also sometimes used informally to describe a company seeking to divest of some of its assets.

Compulsory Liquidation

The parties which are entitled by law to petition for the compulsory liquidation of a company vary from jurisdiction to jurisdiction, but generally, a petition may be lodged with the court for the compulsory liquidation of a company by:

  • The company itself
  • Any creditor which establishes a prima facie case
  • Those shareholders be required to contribute to the company’s assets on liquidation
  • A minister, usually the one responsible for competition and business

An official receiver

Voluntary Liquidation

Voluntary liquidation occurs when the members of a company resolve to voluntarily wind up its affairs and dissolve. Voluntary liquidation begins when the company passes the resolution, and the company will generally cease to carry on business at that time (if it has not done so already).

After the removal of all assets which are subject to retention of title arrangements, fixed security, or are otherwise subject to proprietary claims of others, the liquidator will pay the claims against the company’s assets. Generally, the priority of claims on the company’s assets will be determined in the following order:

  1. Liquidators’ fees
  2. Secured Creditors – who have a legal right or charge over a property or asset of the Company.
  3. Preferential Creditors – like employees.
  4. Unsecured Creditors – other trade creditors, suppliers, unsecured portion of fixed charge debts, landlords, etc.
  5. Shareholders

Liquidation Process for Companies in the UAE

UAE Mainland Companies

The process involves two stages:

Stage 1:

  • Prepare notarized minutes confirming the company liquidation and the appointment of a liquidator.
  • An agreed upon and attested copy of the letter of appointment of liquidator.
  • Apply for cancellation by filling the required form through DED or other approved channels.
  • DED will issue a liquidation certificate.
  • The notice of liquidation is to published in two local newspapers (in Arabic).
  • The notice gives the debtors a grace period of 45 days from the date of issue to submit their claims.

Stage 2:

  • A declaration letter from the liquidator and the partners indicating no objection from any other parties during the grace period needs to submitted to the DED.
  • The shareholders’ resolution for dissolution must also be prepared.
  • Apply for the cancellation of the trade license through required approvals.
  • Cancellation of the firm card at the Ministry of Human Resources and Emiratization.
  • Cancellation of the foreign partners’ visas sponsored by the company at the respective General Directorate of Residency & Foreigners Affairs
  • Submit all the above documents, along with the liquidation report from the appointed liquidators, to get the approval for final cancellation.
  • DED will determine the fees.
  • You can receive the certificate of deregistration (cancellation) after paying the requested fees.

UAE Civil Works Companies:

  • Fill in the required cancellation form.
  • Cancellation of the firm card at Ministry of Human Resources and Emiratisation.
  • Cancellation of the foreign partners’ visas sponsored by the company at the respective General Directorate of Residency & Foreigners Affairs.
  • Apply for the cancellation of the trade license through required approvals.
  • Prepare a partnership cancellation contract authenticated by the notary public.
  • Submit the above documents and collect license cancellation certificate.

UAE Sole Proprietorship:

For sole proprietorships, the requirements are:

  • a no objection letter from Ministry of Human Resources and Emiratisation
  • a residence cancellation proof for non-Gulf nationals

Dissolution of Company Branches:

In case a company under liquidation has established its branches in other Emirates, then the branch is also be dissolved.

Liquidation of Companies in Free Zones

In DMCC:

  • Application for closing the business must be submitted through the DMCC member portal.
  • The authorities, duties, and responsibilities of the Directors of the company will be terminated as an effect of the submission of the company termination application. The application will be reviewed and processed.
  • Announcement in a local Arabic newspaper.
  • Cancellation of the employees’ visas and work permits.
  • the company needs to cancel utilities and telecommunication services and collect an NOC from the utilities providing company for processing the closure.
  • Submission of the liquidation report along with the relevant documents.
  • DMCC authorities will then file the final termination of the company and issue termination letters.

In JAFZA:

  • you must notify the authorities three months prior for the office and warehouse facility and 6 months prior for plot facility.
  • Cancellation of the employees’ visas and work permits.
  • Submission of the liquidation report along with the relevant documents.
  • the company needs to cancel utilities and telecommunication services. Collect an NOC from the utilities providing company for processing the closure.

As per the UAE Labour Law, prior to termination of the employee contracts, the employers are required to give their employees a two-month, paid notice period. In many cases, employees can keep their residency visas until the expiry of their company’s trade licence.

Documents required to prepare a liquidation report:

  1. Shareholders’ resolution for dissolution of the Company
  2. Bank Closure Letter
  3. Customs Clearance Certificate (if the company is registered with the local customs authority)
  4. Dues Clearance Certificate (eg. clearance of dues from government entities, water and electricity authorities, telecommunication authorities, tax authorities, etc.)
  5. Latest audit report (if any)
  6. Books of accounts from the end of previous audited period.
  7. Latest trade license and MOA (Memorandum of Association)
  8. Contact details of the shareholders

All the above documents may have to be submitted to the licensing authority as well to process the liquidation and deregistration.

We offer liquidation services and can assist you with your Company’s liquidation process. For any support or clarifications contact us.