Liquidation, also known as winding up or dissolution, is the formal process of closing a company’s operations. This involves selling off assets, paying debts to creditors, and distributing any remaining funds to shareholders. The process becomes necessary when a company is no longer viable, whether due to a lack of assets, financial distress, or a voluntary decision by the owners.
Liquidation procedures in the UAE vary depending on the company’s jurisdiction, whether it is a Free Zone or on the Mainland. Both processes require careful adherence to legal requirements to ensure a smooth closure and avoid penalties. The entire process can take between 60 to 90 days.
Mainland Company Liquidation
- Board Resolution: The company’s shareholders must pass a board resolution to liquidate the company and appoint a certified liquidator. This resolution must be notarized.
- Initial Approval: You must submit an application for preliminary license cancellation to the Department of Economic Development (DED).
- Clearance & Paperwork: All outstanding liabilities must be settled. This includes obtaining No Objection Certificates (NOCs) from various government departments such as DEWA (electricity/water), Etisalat/Du (telecom), and the relevant bank, and settling any dues with the Department of Labor and Immigration.
- Public Notice: A liquidation notice must be published in a local newspaper (usually in both English and Arabic) for a period of 45 days. This allows any creditors to raise objections or claims.
- Final Report: After the notice period, the appointed liquidator must prepare and submit a final audit report (Statement of Affairs) to the DED. This report confirms that all liabilities have been settled.
- Final Certificate: Once all requirements are met and all fees are paid, the DED will issue a final deregistration certificate.
Free Zone Company Liquidation
- Board Resolution: Similar to a mainland company, shareholders must pass a resolution to liquidate the company and appoint an auditor or liquidator approved by the specific Free Zone Authority.
- Board Resolution: You must pass and notarize a board resolution to exchange, cancel, or wind up the LLC company and name vendors.
- Public Notice: Some free zones require a public notice of liquidation to be published for a period of 45 days. This is done to give creditors a chance to file claims.
- Final Clearances: All liabilities, including employee salaries, visa cancellations, and utility bills, must be settled. You need to obtain clearance certificates from all relevant authorities.
- Final Report: The liquidator submits a final report to the Free Zone Authority confirming that all liabilities are cleared and the process is complete.
- Final Certificate: Once the free zone authority confirms all requirements are fulfilled, it will issue a license cancellation certificate and remove the company from its register.