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Blog Details
Understanding Business Liquidation and License Cancellation in the UAE
by Coordinator
2023-07-25
TAX
Introduction: In the business landscape of the UAE, companies sometimes face the need to liquidate their operations for various reasons. Liquidation involves the orderly winding up of a company's affairs, which can be either voluntary or compulsory. Additionally, cancelling the business license is a crucial step in the liquidation process, informing government entities that the company is no longer in operation. In this blog, we will delve into the different types of liquidation, the importance of cancelling the business license, the step-by-step procedures involved in the liquidation process, and the consequences of liquidating a company. Types of Liquidation: 1. Free Will Liquidations: Directors of an insolvent company may decide to halt trade and sell assets to pay creditors. Alternatively, shareholders may dissolve a solvent firm after completing its objectives. 2. Compulsory Liquidations: Creditors may seek court orders to liquidate a business if its obligations are not met. Courts can order a company to sell assets to settle debts. Importance of Cancelling the Business License: Cancelling the business license is a vital step in the liquidation process to inform government entities about the company's closure. By doing so, businesses can avoid incurring fines or penalties that might arise if licenses are not renewed. Shareholding companies must also discharge liabilities towards creditors and partners before initiating the cancellation process. Step-by-Step Liquidation Process: 1. Canceling Employees' Visas: Prior to liquidation, all active UAE resident visas of employees should be cancelled if they need to switch sponsorship or leave the country. 2. Issuing Board Resolution: A board resolution with the liquidation decision must be attested by the Notary Public, followed by the appointment of a liquidator. 3. Obtaining Liquidation Certificate: Once the liquidation process is complete, the liquidator issues the company liquidation certificate after fulfilling the necessary requirements. 4. Publication of Liquidation Advertisement: The liquidator publishes an advertisement in two local Arabic newspapers, allowing creditors to submit financial claims within 45 days. 5. Confirmation of No Objections: The liquidator and partners confirm that no objections or claims have been received from third parties during the advertisement period. 6. Final Audit Report: The liquidator prepares and submits the final audit report to the registration authority after meeting all previous conditions. 7. Cancelling Visas of Investors and Partners: Active visas associated with the company are cancelled during this step. 8. Obtaining Clearance Letters: Clearance letters from the Ministry of Labour, Immigration, and utility providers are obtained to complete the liquidation process. Consequences of Liquidating a Company: Upon liquidation, the company ceases all operations and cannot engage in further business or employ individuals. Assets are used to clear debts, and any remaining funds are distributed among shareholders. Conclusion: Liquidating a business in the UAE is a well-structured process that involves multiple steps, including cancelling the business license. Seeking assistance from professional business consultancy firms like STARKS can streamline the process and ensure a smooth and efficient liquidation. If your company faces the need for liquidation, our team of experts is equipped to handle the entire process, from preparing the necessary documents to finalizing the liquidation.
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