Voluntary company liquidation is one of the best exit strategies available for businesses. Companies opt for voluntary liquidation in Dubai for a wide range of reasons including debt, adverse market conditions, low demand for the product in the market, losses etc. Directors also liquidate their company when its business objective is achieved or the company is no longer viable to run.
However, businesses should prepare in advance so that they can avoid any potential mistakes during voluntary company liquidation in Dubai. Directors or shareholders should also be fully aware of what will happen to the entity while opting for voluntary company liquidation in Dubai. Having a firm grip over all the steps of liquidation (from appointing company liquidators in Dubai to submission of the liquidation report) will help you stay away from any uncertainty. Read ahead to know more about the effects of voluntary liquidation on a company and the people involved:
Directors’ powers cease
Directors or shareholders are required to convene a general assembly and pass a board resolution to liquidate a company in Dubai. They need to notify the relevant licensing authority about the liquidation as per relevant regulations. They may be required to state the reasons for a company’s liquidation as well.
The directors should appoint a company liquidator who will formally carry out the liquidation process. However, the powers of the directors cease once they appoint the company liquidator in Dubai. The liquidator will be in charge of the affairs of the company till the liquidation process comes to a close.
Company stops trading
The most important effect of voluntary liquidation on a company is that the entity will stop trading immediately. The company will stop doing business and it cannot hire employees as well. A liquidator will close down the company and sell off its assets for the benefit of the creditors. Any money left will go to the shareholders of the company.
Legal proceedings against the business will end
Once a company in Dubai goes under liquidation, all the legal proceedings against it stop. An advertisement about the liquidation of the company will be published in newspapers (as per the regulations of the licensing authority). There will be a lock-in period from the date of publication of the advertisement and any claim against the company should be made within this grace period. The licensing authority will not entertain claims made after the lock-in period.
Employees made redundant
When the company is shut down through voluntary liquidation, all the employees will be made redundant. The directors will apply for cancelling the visas of all of their employees as well. However, the employees have the right to be compensated for being made redundant. Companies providing company liquidation services in Dubai can advise you further in this regard.
The company is no longer a VAT registrant
Liquidation will have an effect on your VAT registration status as well. As per the regulations of VAT, a company under liquidation needs to file for VAT deregistration. The application for VAT deregistration should be submitted to the Federal Tax Authority (FTA) within 20 days of cessation. The FTA will impose a fine of AED 10,000 if the company under liquidation fails to comply with this requirement.
The company’s corporate bank account will be closed
Your company’s business bank account needs to be cancelled before applying for company liquidation in the UAE. The shareholders need to obtain proof of the cancellation of the bank account and submit it to the regulatory authority. You may obtain a bank account closure letter and submit it to the licensing authority.
The company’s name will be struck off
The process of voluntary liquidation in Dubai will bring your company to a formal end. Once the company liquidator submits the liquidation report to the regulatory authority, the name of the company will be struck off from the register. Moreover, the license of the company will be cancelled.
Hire the Best Company Liquidators in Dubai, UAE
Even though voluntary company liquidation in Dubai is the best exit strategy for companies, directors need to understand what happens to their company during and after the winding-up process. You may have learned some of the important consequences of voluntary liquidation through this blog. Each point stated in this article might help you prepare for winding up a company in the UAE.
However, the liquidation process involves a series of complex steps and that’s why you need to hire the top company liquidators in Dubai such as Jitendra Business Consultants (JBC). We have helped business owners to wind up all types of companies including offshore, mainland and free zone companies across the UAE. Our highly qualified team of liquidators can execute the liquidation process seamlessly and in compliance with the existing regulations. JBC’s experience and learning curve will allow you to complete the process fairly quickly.