What are the guidelines for the company liquidation process in the UAE?

For novices, liquidation in finance and economics is the process of bringing a business to an end distributing its assets to claimants. It usually occurs when a company is insolvent; it cannot pay its obligations due. When a company goes into liquidation, its assets are sold to repay creditors, and the business closes down.

Liquidation can either be voluntary or compulsory.

• Voluntary liquidation is when a company decides to dissolve itself on its terms, as approved by its shareholders. This decision usually occurs when a company decides that it has no reason to operate anymore or is not feasible.

• Compulsory or Involuntary liquidation are significantly different from voluntary liquidations. A company is forced to liquidate and sell its assets by economic conditions, company regulations, or court orders. It usually happens when a company goes bankrupt.

To altogether terminate a business or company in the UAE, the below-mentioned requirements must be followed.

1. The company must not have any liabilities.

2. All existing active visas must be cancelled.

3. All existing corporate bank accounts must be closed.

4. Any assets at the time of liquidation must be transferred to the shareholders or the third party.

5. All fees and charges concerning the free zone authority must be cleared.

6. Immigration clearance must be obtained from the free zone authority.

7. The company must prepare a resolution to liquidate and appoint a licensed liquidator to carry out the procedure.

8. The liquidator must approve the order of action of the company's activity and send confirmation that the company has no assets, obligations or liabilities by preparing a final audit report/liquidation letter.

The liquidation process in the UAE can be tricky because there are loads of authorities with their own liquidation rules. Since the process involves handing your company over to a registered liquidator who sells your assets, pays your creditors, and dissolves the business, the process typically takes around 12 weeks for simple companies or up to 18 months for more complex ones.

For a smooth liquidation process, you will need to follow the instructions, collect all documents, and pay the relevant fees.

Also, if you're an employee, you need not panic. Under the Bankruptcy Law, payments to be made to employees are subject to a cap of 3 months salary as a maximum. Employees are also entitled to receive their gratuity, notice pay and payment regarding accrued but untaken annual leave. In addition, an employee should attach an application to the liquidation as mentioned earlier with the case details to avoid any adverse consequences.

All in all, the liquidation of a company takes place in grave circumstances. The whole process can be exhausting as several vital pointers to keep in mind. But by following the basic principle rules mentioned above, one is sure to get through the procedure steadily.

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