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Planning To Liquidate Your Company?
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A business planning to end its operations must do it legally through the process of company liquidation in Dubai. The process of voluntary liquidation allows the entrepreneurs to shut down the operations by amicably settling all the dues with creditors and employees. The liquidation process has, to a great extent, ended a bad practice where the business owners abscond from the country, forced by enormous amounts of money they owe to creditors, banks or even employees. Companies operating in mainland, free zones or offshore can wind up their operations by availing liquidation services in Dubai.
The business owners or shareholders need to appoint liquidators in Dubai to carry out the process of winding up a company. Even though the general proceedings are similar, there might be slight variations in requirements depending on the rules set out by the licensing Authority. Business owners planning to wind up their companies can read ahead to understand the standard procedures, conditions and requirements associated with the process of company liquidation in Dubai.
Top Reasons for Winding up a Company in Dubai
Financial stress is a common reason for business owners opting to wind up a company in Dubai. However, it is not the sole reason that leads to voluntary liquidation in Dubai. Business owners shut down their companies due to various reasons, including debt, loss, changes in market conditions, products losing relevance or demand in the market, achievement of business objectives etc.
Key Steps in Liquidating a Company in Dubai
- Shareholders must pass a resolution to wind up the company
- A liquidator (a licensed audit firm) is appointed to conduct the liquidation
- Liquidator presents acceptance letter
- Get resolution notarized from the notary public
- Submit the documents to the relevant mainland, free zone or offshore Authority
- Publish a notice of liquidation in a local newspaper
- Clearance from Immigration (all visas must be cancelled)
- Clearance from Labour department
- Clearance form Customs
- Obtain bank account closure letter
- Obtain clearance from RTA, Electricity & water authority, Etisalat etc.
- Submit the final Liquidation report along with the clearance letters
- The licensing Authority issues a cancellation certificate and removes the company from the Register
Conditions for Submitting Board Resolution
In case the shareholders are not physically present in the UAE, the resolution / Power of Attorney can be notarised and attested from the UAE embassy of the country of origin of the shareholders. It has to be attested and legalized by the Ministry of Foreign Affairs and Ministry of Justice in the UAE. The resolution must also state the name and complete address of the liquidator. However, these steps are not applicable in the case of liquidating a sole establishment in Dubai.
Special Compliance Requirements
In addition to the standard procedures, companies must assess their status whether or not they qualify to meet other compliance requirements such as:
De-registration of Value Added Tax
If a company has registered for Value Added Tax (VAT), it becomes eligible for de-registration once the liquidation procedure starts. However, many business owners forget to apply for de-registration while liquidating a company in Dubai. As per Article (14) of VAT Executive Regulations, a VAT registered company must apply for VAT de-registration within 20 business days of becoming eligible. If a company under liquidation fails to apply for VAT de-registration within the stipulated time, a penalty of AED 10,000 will be incurred. VAT de-registration is a time-consuming process, and therefore, the business owners need to prioritize this mandatory requirement while developing their exit strategy.
Maintaining Real Beneficiary Register
A company under liquidation is obliged to meet the requirements set out in the Ultimate Beneficial Ownership (UBO) law. As per Cabinet Resolution No. (58) of 2020 on Ultimate Beneficial Ownership, a company undergoing liquidation should hand over the Real Beneficiary Register and Partners and Shareholders Register, if any, or a true copy to the Registrar within thirty days from the date of the liquidator’s appointment.
Further, the company administrators or the liquidator must maintain the Registers for a period of at least five years from the date of liquidation. In the wake of the new regulations, the liquidator assumes a greater role here and therefore availing reliable company liquidation services in Dubai becomes imperative.
ESR Notification, Report Filing Before Liquidation
With the introduction of Economic Substance Regulation (ESR), the compliance burden of companies under liquidation has increased. If a company is carrying out any Relevant Activity during the course of the winding-up process, the liquidator should ensure that the firm meets all relevant ESR obligations. The company must file ESR annual ESR notification, submit ESR Reports and should meet the Economic Substance Test for any period during which it carries on a Relevant Activity and derives Relevant Income. As non-compliance will result in penalties, it is better to consult with approved company liquidators in the UAE well in advance.
The Best Company Liquidation Services in Dubai
Company liquidation in Dubai is a robust strategy to exit the business, but it involves a series of steps and procedures. Compliance requirements related to ESR and the UBO has made the process of winding up a company in Dubai more complex and time-consuming. Planning the exit while starting the business is the best strategy to make the liquidation process more effective. Consulting with company liquidators in Dubai, such as Jitendra Business Consultants (JBC), will enable the investors to develop an efficient exit strategy. JBC’s business setup consultants and auditors strive towards making the process of closing down a company in Dubai less strenuous for the investors. JBC takes care of all the requirements such as visa cancellations, ESR filing, VAT De-registration, maintenance of the Real Beneficiary Register etc.