All You Need to Know About Company Liquidation in the UAE

Due to certain unforeseen circumstances and liabilities, when a business is not able to conquer the market as expected, the company owners would consider the company liquidation process. It is all about winding up the company’s operations and selling its assets for repaying liabilities or financial obligations. It is required to file a petition to the court for the same.

Few Situations When A Company Is Liquidated

• When it is unable to pay creditors
• When the company has no cash or liquidity for financing
• The company is not able to procure any form of revenue or business
• When the company’s losses exceed the profits
• The directors decide to vote for liquidation at the board meeting.

Types of Liquidation

Voluntary Liquidation – In this process, the shareholders of a company decide to liquidate the company when it is not able to generate profits. The board of directors with the consent of lenders decides to liquidate all assets to pay its creditors. For example, selling all machinery of the company for repaying the debts.

Compulsory Liquidation by the court – When a company is under financial distress

If a company is under financial distress and its debts are not paid on time, creditors may request the court to liquidate the company’s assets in order to collect their dues. As a result, the court may make it mandatory for a company to liquidate and sell its assets for paying all outstanding debts. This process is known as compulsory liquidation.

Benefits of Company Liquidation

• Debt will be paid to the lenders and owners won’t have to worry about the money issue.
• The management and directors will be saved from prospective legal actions.

Documents required for Company Liquidation

Firstly, the company must produce the Board Resolution for proving that the decision to liquidate has been taken. This resolution will include the name of the appointed liquidator. The original registration certificate should be provided, along with the liquidator’s credentials.

All these documents require notarization. After the first steps of the liquidation have been completed, the business should also cancel any special permits or licenses it has obtained for performing different economic activities in the UAE. Branches need to produce the original documents from the parent company. Apart from these the following documents are also required:

• A letter showing the company liquidation is approved
• The license of the appointed liquidator for the company that performs the process
• The dissolution documents of the company in the UAE
• Documents of company owners that it is subject to liquidation
• Clearance letter from government departments like immigration, labor, customs etc
• Bank closure letter

If you require any assistance for company liquidation in UAE to limited liability company, free zone company and offshore company, Corpin Consultants can assist you from scratch to end. Contact us at +971 55 843 2911 or info@corpinconsultants.com to know more.