Liquidating your company on UAE Mainland

Lavin Nalinababu, Business Consultancy

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Liquidating your business in the UAE might seem like an easy process when compared to starting one. But this is just a misconception as liquidation process is quite complicated and the process usually takes 1-3 months depending on the jurisdiction and the activity. The process requires you to comply with numerous legal procedures. The government authorities concerned in the UAE should be notified about the liquidation of your firm and licenses must be cancelled.

Here we will discuss in detail on the steps involved in the liquidation of your company on UAE mainland.

Cancelling your business license
This is one of the primary steps when it comes to liquidating a company in UAE, as it will inform government entities that you are no longer in business. Hence, unnecessary fines and penalties won’t be incurred on the license, which is usually the case if license is not renewed on time.

In the case of a shareholding company, discharging the liabilities towards creditors and partners is mandatory.

Formalities for cancelling your business license
The procedure for cancelling a license is different for sole proprietorship (single shareholder companies), and companies with multiple shareholders. In the case of the former, cancellation must be applied via licensing authority and required clearances must be obtained from  various departments depending on the activity;

  • Ministry of Human Resources and Emiratisation
  • Directorate of Residency and Foreigners Affairs
  • The relevant water and electricity authority
  • The leasing entity
  • Customs
  • Federal tax authority

Whereas, companies with shares need to liquidate their shares, collect the debts and pay creditors, prior to finalising with LICENSING AUTHORITY .Any company in UAE need to appoint a liquidator to carry out the liquidation process

Steps to dissolve all kinds of companies 

The process begins with preparing notarised minutes of the general assembly that confirms the company liquidation and the appointment of a liquidator. The next step requires you to arrange an official letter by a registered liquidator accepting his responsibilities.

A form must be filled via licensing authority LICENSING AUTHORITY or other approved channels to apply for cancellation, following which a liquidation certificate will be issued by the licensing authority. You will have to publish the notice of liquidation in two local newspapers, which gives the debtors a grace period of 45 days to submit their claims.

The next stage involves the following steps;

  • Submitting a declaration letter from the liquidator and the partners to LICENSING AUTHORITY . This is to ensure there isn’t any sort of objection from any parties during the grace period.
  • Getting necessary approvals from certain government departments and cancelling the firm establishment card at Ministry of Human Resources and Emiratisation. The visas of foreign partners sponsored by the company must also be cancelled at the respective General Directorate of Residency & Foreigners Affairs.
  • All the documents should be submitted to get approval for cancellation and for this, a fee stipulated by LICENSING AUTHORITY must be paid.

One will be granted with the certificate of deregistration upon payment of fees.

Another option, other than terminating your license, is to freeze the same. But this is applicable only if you plan to close your business for a short period of time and not permanently. Freezing of trade license is allowed for a period of three years and one need to pay certain amount of fee for this.

In the case of civil works company, the notary public must authenticate a partnership cancellation. For sole proprietorship companies, a no objection letter must be obtained from the Ministry of Human Resources and Emiratisation, in addition to a residence cancellation proof for non-Gulf nationals.

There are many who don’t bother to follow the procedures while planning to liquidate their company in UAE. This might not just get you into legal trouble, but will also affect any future plans to setup a company in the country.

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