Guide to Company Liquidation in Dubai

Introduction

Company liquidation in Dubai refers to the formal insolvency process of winding up a company, converting its assets and properties into cash to repay debts and cover the costs of liquidation, along with distributing remaining assets (if any) to the shareholders. After liquidation:

• A company is closed and its operations cease
• The company's name is removed from the Trade Registry
• The company's business licenses are revoked

How to Initiate the Company Liquidation Process in Dubai?

The company liquidation process in Dubai can be:

Voluntary: Shareholders or the company resolve and mutually agree to liquidate the company and appoint a liquidator.

Compulsory: The court (or competent authority) may order a company to be liquidated when it's unable to pay its debt obligations (upon receiving an application from the creditors), or there is a dispute between the shareholders over whether it should be liquidated or not.

Liquidation is often the last resort for distressed businesses going through financial difficulties in Dubai. However, company liquidation in Dubai can also be beneficial for group consolidation or restructuring of the business.

Irrespective of the reason behind the company's liquidation, proper compliance with Dubai company liquidation rules is essential. According to the UAE Ministry of Economy, strict adherence to federal regulations is mandatory for all business operations, including liquidation procedures.

Which Laws Govern Company Liquidation in Dubai?

Depending on the structure and jurisdiction, companies in Dubai should comply with the following laws:

• Federal Decree Law No. 32 of 2021 on Commercial Companies
• Federal Decree Law No. 50 of 2022 on Commercial Transaction Law
• Federal Decree Law No. 51 of 2023 on Bankruptcy (if the company wants to avoid liquidation)

Note: Company liquidation in Dubai is to be complied with as per the above UAE federal laws, as well as any other rules specific to that free, mainland, or offshore zone. The Dubai International Financial Centre (DIFC) has its own specific regulations for companies operating within its jurisdiction.

What Documents are Required for Company Liquidation in Dubai?

While the exact list of documents may vary, here's a list of documents, the copies of which most companies undergoing liquidation in Dubai would need:

• Memorandum of Association (including any amendments)
• Shareholder passports and Emirati ID
• Liquidation resolution
• Appointment of Liquidator (including acknowledgement from the liquidator)
• Liquidation notice
• Ledger and accounting records

Company Liquidation Process in Dubai: Step-by-Step Guide

The company liquidation process in Dubai requires a company to follow clear procedures to close down the business. Here's what the process looks like:

1. Shareholders' Liquidation Resolution

Unless the company is being liquidated through a court order, the shareholders should draft, finalize, and approve a liquidation resolution in a shareholder's meeting, and record the minutes of the meeting.

2. Appointment of a Registered Liquidator

The next step is the appointment of a registered liquidator, who would be responsible for overseeing the liquidation process. A formal letter of acceptance from the liquidator is required.

Important: Only a general partnership, limited liability company, simple limited partnership, public joint stock company, and private joint stock company is required to appoint a liquidator.

3. Obtaining Provisional Liquidation Certificate

Once the Dubai company's liquidation resolution, along with other documents, is submitted to the relevant authority, a 'Provisional Liquidation Certificate' is issued.

4. Publishing Liquidation Notice

The company must publish an advertisement or notice in two local daily newspapers, in English as well as Arabic. The Dubai Department of Economic Development (DED) provides specific guidelines for publication requirements.

5. Completing the Notice Period

There is a forty-five-day notice period during which the company must terminate and cancel any licenses, permits, visas, and obtain the necessary clearance letters from the UAE government department, the landlord, and the bank, where the corporate account was opened.

6. Settlement of Debts and Asset Sale

The company's assets are sold, and the debts are settled. This process may take longer if the company is facing solvency and liquidity problems.

7. Final Report

After the notice period, the liquidator can submit the liquidation report, along with the license cancellation fee, to the relevant authority. Once the report is reviewed and approved, the company will be deregistered, and a 'License Cancellation Certificate' will be granted.

Preparing and submitting the required documents and appointing a qualified liquidator are crucial steps of a company liquidation process in Dubai. Discuss your case with Kayrouz & Associates' Dubai company liquidation attorneys to get sharp, real-world legal solutions, backed by decades of experience.

What are the Key Considerations of the Liquidation of an LLC in Dubai?

For the liquidation of an LLC in Dubai, specific certification rules and procedures are applicable, such as:

Certification by Notary Public: The shareholder liquidation resolution is required to be certified by a notary public.

Certification at Embassy: If the shareholders are not present in the UAE, the liquidation resolution must be notarized and certified at the UAE embassy (in the country where they are present), and then attested at the UAE Ministry of Foreign Affairs (MoFA) and Ministry of Justice.

What are the Legal and Financial Consequences of Non-Compliance with Company Liquidation Rules in Dubai?

Other than the specific penalties listed in the UAE Federal law for non-compliance with a provision of the company liquidation process in Dubai, non-compliance can also lead to:

License Fines and Penalties: During liquidation, any valid and subsisting licenses granted to the company during its operations must be cancelled. A License Cancelation Certificate should be obtained to avoid non-renewal penalties and fines.

Extended Procedure: Non-compliance can extend the liquidation process and complicate the exit process. This would mean added liquidation costs for the company.

Goodwill and Reputation: Shareholders planning to re-enter the Dubai markets need to consider the cost of non-compliance or non-payment of debts on their reputation and goodwill.

There are many options available that businesses can explore, other than liquidation. At Kayrouz & Associates, our Corporate and Commercial Law Practice provides strategic guidance to companies in Dubai in all stages of growth, including company formation & restructuring, exit planning, M&A, and joint ventures.

How Long Can a Company Stay in Liquidation in Dubai?

There is no specific time limit during which a company may stay in liquidation in Dubai. While most liquidations take anywhere from a few weeks to a couple of months to complete, some liquidations, involving multiple claims, solvency issues, litigation, and disputes, can take years to resolve.

As per Article 328, Federal Decree Law No. 32 of 2021, the liquidator would have to complete the company liquidation process in Dubai within the period mentioned in the liquidation order or resolution appointing him. This period may be extended under certain conditions.

How Kayrouz & Associates Supports Company Liquidation in Dubai

Properly planning the exit for your business, and taking the assistance of expert lawyers, isn't just reasonable prudence; it's the right way to manage legal risks, protect financial value, and avoid fines and penalties.

Kayrouz & Associates' Corporate and Commercial Law Team, led by our founder and Chief Legal Officer, Mr. Pierre Kayrouz, assists companies in meeting their commercial objective with clarity and precision. Here's how our Corporate Restructuring and Exit Planning practice can help in the Dubai Company Liquidation:

• Provide legal advice on voluntary liquidation and winding up
• Assist in asset or share divestment strategies
• Support in regulatory filings and compliance management during liquidation

Book a consultation today, or visit our offices in Dubai and Abu Dhabi to discuss your case.

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