Freezing business license in UAE
Lavin Nalinababu, Business Consultancy
The corona virus outbreak has resulted in millions of employees working from home and there are many companies that are forced to cease their business. But the pandemic is not here to stay. Hopefully, the situation will get better in a couple of months and life will be back to normal. Going through the whole process of starting your business again can be hectic. So, what other alternative do you have other than liquidating your company?
If you are in UAE and you plan to temporarily close your business, then the best option would be to freeze the business license. Business licenses can be frozen for upto a period of three years, by paying a freezing fee. In the case of sole establishments registered in DED, freezing is allowed for a period of one year.
A company cannot carry on with any of its operations, once the license is frozen. It is illegal. But, the owner of a frozen license or shareholder can start new business in Dubai, by applying for a new license under his name.
The option to freeze license is a savior for many, as it saves them from accumulated fines when license is not renewed, and liquidation can also be avoided.
If an owner fails to renew his license on time, he will have to pay a non-renewed license fine. The rate of the fine amount is different for different emirates and free zones. The fine will be applied every month or year.
The license will be automatically cancelled, if it is not renewed for 5 continuous years.
There are certain procedures to freeze a license in UAE, apart from paying fees. It includes;
- Issuing a letter on corporate letterhead requesting to temporarily freeze the license. The letter should contain details on the reasons and justifications behind the decision.
- Canceling all employment visas
- Obtaining a confirmation letter from Ministry of Human Resources and Emiratisation mentioning that there are no sponsored people on your license. The letter must also confirm that labor restrictions are not imposed on the license.
In the case of Dubai Economic Department, the freezing fee of AED 2,000 per year along with AED 210 per each due month since license expiry date must be paid, after submitting the application. A report from the inspection division in DED must also be submitted.
Once you plan to restart after the completion of the freeze period, the manager or shareholders must submit an application for renewal with a valid lease contract registered in Ejari at the Economic Department.
Nobody would like to close their company for reasons that could be sorted with time, so when you have the option to temporarily shut down your business and resume it once you are back on track, why not opt for it.
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