Businesses are the backbone of a nation’s economy. Growing number of corporations and small businesses have given rise to the number of entrepreneurs in all domains possible. In just a year, several ideas have been implemented; however, only a few were able to sustain for the long haul.
Running a business involves a massive risk, so businesses have to adapt to changing business climates. The ability to sustain in a competitive market is the defining mark of a successful organization. When a business fails to do so, it suffers from losses which only keep accumulating. At one point, it has to undergo company liquidation in Dubai
Company liquidation in UAE: what is it?
When a business in UAE fails in sustaining itself and continuously faces a decline in sales, it eventually has to implement insolvency procedures. Company liquidation is the process wherein assets of the business are sold to clear liabilities. Similar to incorporation, liquidation of company in Dubai involves certain criteria which are to be fulfilled in order to cease any future trade of the business. Prior to initiating the process, let us take a close look at the scenarios which often results to company liquidation.
Scenarios that result to company liquidation
• Inability to pay debts and other liabilities;
• Total liabilities of the business exceed total asset value;
• Company has high rate of attrition;
• Company has failed in registering itself as a public or private company with the UAE Registrar;
• Failure in commencing trade for a certain period of time following date of company incorporation
Conditions to be met for liquidation of company in Dubai
If you are running a business and you are experiencing any of the items mentioned above, then we suggest you talk to a company liquidator in Dubai
for advice and assistance. You may also have to undergo company audit. If your business fails in improving its performance following a company audit, it will be best to undergo the liquidation process. In order to implement company liquidation, the following conditions are to be met:
1. Cancellation of all employee residency visas – this is one of the several conditions to be met by a business in order to undergo company liquidation. If there are active resident visas, it is important to cancel them prior the company liquidation. The employees will have to shift to sponsorship from another company. They may also have to leave the country.
2. Issuance of resolution by the Board of Directors – the second condition would be the issuance of a resolution by the Board of Directors stating decision to liquidate the company and the liquidator appointment. The resolution has to be attested by a public notary.
3. Cease of trading - apart from appointment of a liquidator, the business also has to cease the operations if it hasn't already. In addition to that, it is advised for businesses seeking liquidation to negotiate with creditors and minimize further borrowing.
Many new businesses and even established companies in UAE ask how long it takes to dissolve and liquidate a company. There's no one answer to the question as it differs from one business to another. The more complex and bigger the company is, the longer it’s going to take to complete the company liquidation.
Since the process of liquidation of company is both statutory and complex, it’s recommended that a business owner plans the entire procedure in advance with the help of qualified liquidators in Dubai
Take note: even when the business has failed, it does not mean that you yourself are a failure. We are often not in control of factors that lead to the liquidation of a company and attempting to control them can only undermine your self-esteem and confidence as a business owner. There’s always room for improvement, of course, so don’t forget to learn from the experience as well.
Documents that are required for UAE company liquidation
• Shareholders’ or board of directors’ resolution stating intent to undergo company liquidation in UAE;
• Passport and emirates ID copies of shareholders or directors;
• Power of attorney (if required);
• Copy of the memorandum of association as well as changes made to the document;
• Copy of licenses and permits of the company;
• Application form for liquidation
According to local legislation and regulations in the UAE, a notice period has to be given to the company where it can complete every single step involved in the successful wind up of a business.
We know you have a lot of questions regarding the crucial matter of company liquidation. As mentioned earlier, it is always best to seek and heed the advice of qualified liquidators in Dubai. They won’t only advice you on what is best for your specific situation, but they can also assist you with the entire process.