Company liquidation is the process of closing down a company. It is an event that usually occurs when a company has no money to pay its remaining debt. When the company operation ends, usually the organizational assets are distributed to creditors and shareholders, based on their priority of claims.
In general, the person who conducts the overall liquidation process is called liquidator. A liquidator is appointed by the court or the shareholders of the company, according to the type of liquidation.
Company liquidation may be of the following two types:
In case of voluntary liquidation, the shareholders of a company will decide to wind up the company as they have no money to pay for creditors. In this type of liquidation, priority is given to the creditors.
Compulsory liquidation is a type of company liquidation which is put forward by court order. Here, the assets of the company are distributed to the creditors and contributors based on the priority of claims.
A liquidator is the chief decision maker in a liquidation process. The duties of a liquidator are as below:
Once the Board of Directors/Shareholders pass a resolution for the liquidation or winding up, and the appointment of liquidator, the liquidator, upon the receipt of such resolution, issues an acceptance letter.
Once the liquidation process is initiated, the liquidator publishes the liquidation notice, both in Arabic and English, in 2 local newspapers.
If needed, the liquidator may overview the collection and distribution of company assets, and the settlement of liabilities.
As the last step in the liquidation process, the liquidator prepares the statement of affairs and the liquidator’s report.
Liquidation process for free zone companies is similar to that of mainland companies, except with regard to notice period, time frame required to liquidate the company, etc.
The UAE government sets out different types of documents to be submitted for the liquidation process. These documents are required for company liquidation both in free zones as well as the mainland. The essential documents are listed below:
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The liquidation of a company in UAE is a complex and time-consuming process. At Alriyadah , we help our clients in following the procedures to wind up a company in UAE, should the need arise. Alriyadah is a financial consultant in UAE, offering a wide range of services including accounting, auditing, software consultancy, and management. We have been providing the best audit services in UAE and the rest of the UAE for over a decade.
For any company liquidation services in UAE, contact us – we’d be glad to assist.
Liquidation period depends on the licensing authorities. For mainland companies, it is normally 45 days. For some free zones it is 15/21 days. There is a 45-day notice required for certain free zones like UAE Creative Clusters Authority, etc.
Yes, it is mandatory to publish the liquidation notice in any 2 newspapers (one in Arabic and the other in English).
Including the notice period, it may take 60-90 days to liquidate a company in UAE.
Yes, a company must cancel all visas and get clearance letter from Immigration Deportment to complete the liquidation process. The company has to pay end-of-service benefits and other statutory dues, such as unpaid leave salary, air ticket, unpaid salary, etc. to the employees.
If already registered under VAT with the FTA, a company needs to de-register during the liquidation process.