Liquidation of Companies Under UAE Law: A Comprehensive Guide Based on Federal Decree-Law No. 32/202

Introduction:

The liquidation of a company is a pivotal process governed by legal regulations in the UAE. Understanding the intricacies of liquidation proceedings is essential for stakeholders involved in company dissolution. Federal Decree-Law No. 32/2021 on Commercial Companies defines the framework for liquidating companies in the UAE, providing clarity on procedures, responsibilities, and liabilities.

Reasons for Termination of Companies:

Article 302 of the Federal Decree-Law outlines general reasons for company dissolution, including term expiration, objective termination, asset loss, merger, unanimous consent of partners, or issuance of a dissolution judgment. Specific provisions apply to joint liability companies, limited partnership companies, and sole proprietorships.

Liquidation of the Company and Division of its Assets:

Upon dissolution, a company undergoes liquidation, a process governed by Article 314 onwards. The termination of managerial authority marks the start of liquidation proceedings. Liquidators, appointed by partners or through court decisions, assume responsibility for asset inventory, debt repayment, and asset division.

Appointment and Responsibilities of Liquidators:

Article 316 mandates the appointment of liquidators, ensuring they are not current or recent auditors of the company. Liquidators operate under guidelines, conducting asset evaluations, debt settlements, and representation of the company before courts.

Inventory and Debt Repayment:

Liquidators prepare detailed asset and liability lists, facilitating debt repayment through systematic procedures outlined in Articles 320 to 326. Creditors are notified of the liquidation commencement, with provisions for disputed debts and judicial deposits.

Liquidation Period and Reporting:

Liquidation timelines are specified, subject to extensions based on partners’ decisions or court orders. Liquidators provide regular interim accounts and a final report of liquidation proceedings for approval by partners or the general assembly.

Division of Assets and Liability Lawsuits:

Upon debt settlement, assets are divided among partners, ensuring equitable distribution in accordance with Articles 333 and 334. Liability lawsuits against liquidators, partners, managers, or auditors are subject to statutory time limits.

Conclusion:

Federal Decree-Law No. 32/2021 on Commercial Companies ensures the orderly dissolution of companies in the UAE. Compliance with legal provisions and diligent execution of liquidation proceedings safeguard stakeholders’ interests and uphold commercial integrity in the UAE.

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