Company Liqudation

Types of liquidation

• Voluntary Liquidations – Shareholders of a company may elect to liquidate a solvent company or the directors of an insolvent company may choose to cease further trading and liquidate its assets in order to pay its creditors.
• Compulsory Liquidations: If a company’s debts are not paid on time, creditors may request the courts to liquidate the company in order for them to collect their dues. The courts may decide to force a company to liquidate and sell its assets in order to pay outstanding debt.

Is liquidation necessary in the UAE even if there are no outstanding debts? Even if there are no debts to be paid to creditors, it is highly advisable to formally liquidate a company rather than simply allowing your trade license to expire. There are many procedures to be completed when formally liquidating a company. Ignoring these may attract various penalties and could also result in the ‘blacklisting’ of company, as well as its directors and shareholders, by government authorities in UAE. This may impact on their involvement in other businesses or damage their ability to set up another company in future

What is the role of the Ministry of Finance? A liquidator is a UAE-registered agent or a firm, typically a chartered accountancy or audit firm, that is assigned to act on behalf of the company to sell its assets in order to generate cash to discharge any outstanding liabilities. A liquidator may be appointed by shareholders via resolution or may be appointed by the courts in the case of compulsory liquidation. Once appointed, the liquidator will issue an official letter of acceptance at the initial stage. Once all its duties are completed, they will prepare a statement of affairs and the liquidator’s report, which are essential to finalise the liquidation process

The liquidation process in the UAE

The liquidation process will vary depending on the following three criteria:

• The type of ownership
• The type of liquidation
• The jurisdiction of registration, whether mainland Emirates or free trade zone.