Freezone Company Liquidation
A company’s Liquidation or closure is when a corporation or business entirely shuts down all of its activities and distributes all of its assets and properties to its creditors and shareholders.
Free Zone Company liquidation in UAE is a defined process that entrepreneurs must follow in the case of a company’s closure.
Specific procedures must be followed for a seamless company liquidation in Dubai. We know how to assist you in the seamless liquidation of your company or organization. The process is also known as corporation de-registration.
The conditions listed below must be met to liquidate a business or company in the UAE. The requirements may differ from one free zone to the next, but most of them will be the same. We can assist you in completing this problematic chore in any of the UAE’s free zones.
What is Company Liquidation?
Company Liquidation is when a debt-ridden firm shuts down operations and sells its assets to pay off its debts and other commitments. It is liquidated when it is determined that a firm can no longer operate. It might be due to various factors, including insolvency (which is generally the primary cause), a refusal to continue operations, and so on.
If a company goes bankrupt, the liquidator sells the firm’s assets to pay off all debts. After repaying the creditors, the remaining positive balance is dispersed to the company’s shareholders.
A liquidator is a person who has been appointed to dissolve a business and put it out of business. This individual is in charge of selling assets to pay off the company’s internal and external debts.
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Types of Liquidation:
A company’s Liquidation can be accomplished in three ways. All of these situations necessitate the services of a liquidator.
The shareholders and directors begin the voluntary liquidation procedures, Creditors’ Voluntary Liquidation (CVL) and Members’ Voluntary Liquidation (MVL).
Creditors frequently begin the mandatory procedure, similar to a court order.
Read on to learn more about each of the three categories:
• Creditors’ Voluntary Liquidation of Creditors:
A Creditors’ Voluntary Liquidation (CVL) is triggered by a shareholder resolution employed by bankrupt corporations.
In this instance, the corporation becomes bankrupt, and the directors or owners begin the procedure to prevent judicial involvement or compulsory dissolution. In other words, the company declares insolvency before its creditors may take legal action against it.
• A Members Voluntary Liquidation (MVL)
• Compulsory Liquidation
Compulsory Liquidation is a term used to describe the process of liquidating a business. Compulsory liquidations are frequently started by a creditor who wants to use a court order to compel a firm that can’t pay its debts to close down.
Requirements for Free Zone Company Liquidation in Dubai
Company Liquidation in Dubai follows a specific procedure depending on the business jurisdiction. The Free Zone Company liquidation procedure in Dubai comprises a series of actions that the entrepreneur must do to guarantee a smooth company liquidation in the UAE.
• There must be no obligations in the firm.
• All current visas must be revoked.
• All business bank accounts must be closed.
• At the Liquidation stage, any assets must be distributed to the shareholders or a third party.
• All fees and charges related to the free zone authorities must be paid.
• The Free Zone Authority must provide immigration approval.
• A liquidation resolution must be prepared, and a licensed liquidator must be appointed to carry out the operation.
• By creating a final Audit Report/Liquidation Letter, the liquidator must approve the course of action for the business’s Liquidation and submit proof that the company has no assets or obligations/liabilities.
Process Involved in a Free Zone Company Liquidation
Each free zone has different liquidation procedures, but most of them follow the same procedure. The following steps are required for free zone company liquidation in the UAE.
Step 1: To get a signed board or shareholder resolution.
It is necessary to have a signed Board or Shareholder Resolution in which all partners agree to terminate the organization. Upon filing the company termination request, all power and obligations of the company’s directors will be terminated.
Step 2 : Notify the Free zone Authority Officially
The free zone must be notified of the desire to cancel, and the free zone will provide you with a cancellation form. The original signed board resolution must be provided with the cancellation notification. Subsequently, the free zone will issue a free zone termination invoice to acknowledge the cancellation request.
The free zone will begin the legal procedure of dissolving the firm once the cancellation money is received.
Step 3 : NOCs & Clearances
All utilities such as DEWA and communications services (Etisalat) in the company’s name must be terminated. A clearance letter must be obtained; any commercial space in the company’s name must also be cancelled, and a clearance letter received.
Step 4 : Employees and Sponsorship
All visas and work permits issued in the company’s name for workers and dependents must be revoked. However, keep in mind that, under UAE labour law, a corporation must provide an employee with two months’ paid notice before terminating their contracts in a company shutdown.
Step 5 : Make a Formal Announcement
A 15-day formal notification in an Arabic newspaper/gazette declaring that the firm is closing is essential. If no claims are filed or resolved, settlement documentation must be submitted to the free zone authority for a closure confirmation to be issued.
Step 6: Confirmation of Termination
The Free zone authorities will provide the company termination certificate when all of the requirements mentioned above have been fulfilled. It’s essential to keep in mind that officially terminating a Free zone firm might take two months.
Step 7 : Business Bank Accounts
The firm termination letter can be taken to the bank to terminate the corporate bank account after being issued. Any leftover bank balance will be distributed among the former firm partners unless otherwise mentioned in the board resolution.
How Long Does a Company Liquidation in the Free Zone Last?
If all other procedures and formalities are followed, the liquidation process might take 45 to 50 days. A free zone will have a single point of contact to close down the business, but a mainland business will need permissions from different departments located across the country.