A business owner who chooses to wind up the operations of his company in Dubai South Free Zone can opt for voluntary company liquidation. The directors or business owners need to stringently follow the procedures and requirements laid out by the free zone authority for completing company liquidation in Dubai South. Consulting with firms that offer liquidation services in Dubai is essential for winding up a company as the process has undergone big changes lately.
The introduction of regulations such as Value Added Tax (VAT), Ultimate Beneficial Ownership (UBO) and Economic Substance Regulations (ESR) have made the UAE company liquidation process more complex. In this era of regulatory changes, let’s explore the new requirements business owners need to understand before liquidating a company in Dubai South Free Zone. Read ahead.
Board Resolution to Liquidate the Company
The board of directors of the company should pass a resolution regarding the liquidation of the Dubai South free zone company. All the directors on the board are required to sign the resolution. The resolution should also mention the name and bank account details of the person to whom deposits must be made after the closure.
Appointment of Company Liquidator
The resolution should also state the appointment of the official liquidator who will oversee the entire process of liquidation. An audit firm in Dubai with a valid license approved by the UAE can be appointed as the company’s liquidator. The powers of the directors will shift to the liquidator once the appointment is finalised. The board should take care to appoint reputable and experienced company liquidators in Dubai to ensure that the winding-up process complies with the existing regulations.
Sending Notice to the Free Zone Authority
Once the decision to wind up the company is made, the free zone authority should be made aware of it. The directors should submit the signed resolution to the free zone authority, stating the reason for liquidation as well as the name of the liquidator. The resolution should also state the approximate time required for completing the voluntary liquidation process.
Apply for VAT De-registration
Applying for VAT De-registration is a mandatory requirement that most VAT-registered businesses forget while undergoing company liquidation in Dubai. Liquidation is a valid reason that makes a company eligible for VAT De-registration. Article 14 of the VAT Executive Regulations clearly states that a VAT-registered company must apply for De-registration within 20 days of becoming eligible for the same. Failing to apply for VAT De-registration within the stipulated time will attract penalties up to AED 10,000. VAT-registered companies should meet this requirement while starting to wind up their company.
Requirements under UBO Regulations
Companies undergoing liquidation in the UAE are bound to meet the conditions set out in the UBO law. The Cabinet Resolution No 58 of 2020 mandates that the companies undergoing liquidation must hand over the Real Beneficiary Register (RBR) and Partners or Shareholders Register to the free zone authority within 30 days of the liquidator’s appointment. Failing to meet this requirement will lead to consequences such as a fine of AED 5000 and a penalty of AED 10,000 for repeating the offense.
Furthermore, the company administrators or the liquidator must maintain the registers at least for five years after the liquidation. Not complying with this requirement will lead to penalties in the range of AED 20,000 to AED 40,000.
Meeting Economic Substance Reporting Obligations
A company that is winding up its operations in the UAE must assess its ESR obligations. If it has conducted any of the nine Relevant Activities during the liquidation period, the company is required to meet ESR obligations such as ESR notification, ESR Report filing and meeting the Economic Substance Test. The nine Relevant Activities are Banking business, Insurance business, investment Fund Management business, Lease Finance business, Headquarters business, Holding Company business, Shipping business, Intellectual Property business, and Distribution & Service Centre business. Failing to comply with the ESR requirement will lead to hefty fines and other severe consequences.
Secure Necessary Clearances and NOCs
Companies operating in Dubai South Free Zone must obtain clearance letters and NOCs from various authorities to complete the liquidation process. The NOCs are required from Dubai Customs, UAE immigration, UAE Labour Department, and utility service providers such as DEWA and Etisalat. Visas of all the employees must be canceled to get the immigration clearance.
Closure of Bank Accounts
The liquidator must see to it that all the bank accounts in the name of the company are closed. The liquidator must also obtain a closure letter from the concerned bank as evidence for the closure.
After obtaining all the NOCs and clearances, the liquidator in Dubai South should publish the news of liquidation in a local daily newspaper. The advertisement serves as a notification for any creditor to object to the liquidation within 15 days of the publication.
Completion of Liquidation
When the process of liquidation in Dubai South is completed, the liquidator is required to submit the liquidation report to the registrar. All the documents and keys of the premises must be handed over to the free zone authority. If everything is in order, the registrar will strike off the company from the registrar and cancel the trade license.
Appoint the Best Company Liquidators in Dubai
Company liquidation in Dubai is a time-consuming process that requires the assistance of experienced liquidators. The business owners must choose qualified and licensed audit firms to complete the process of company liquidation in the Dubai south free zone. The best company liquidators in Dubai such as Jitendra Business Consultants (JBC) have the experience, qualifications and legal know-how to wind up a company.
JBC can help the companies secure all the clearances and draft the relevant documents. JBC is well equipped to help the companies meet complex regulatory requirements such as UBO, VAT, and the ESR. Appointing JBC as liquidators will help the companies wind up the operations without any legal hassle.