Liquidation Of Companies


When any business can no longer afford to operate, liquidation is a formal process done by an approved firm to ensure the business meets its obligations to shareholders and other stakeholders (e.g. debtors, employees, and Government entities).

In this guide, we take a closer look at Company liquidation to detail what it entails and how to proceed.

What You Need to Know About Liquidation of Companies

What exactly is the liquidation of companies?

In essence, business liquidation is the process of ending the business and distributing the various assets from the business to claimants. Businesses are then able to claim bankruptcy.

It can also involve the selling or auctioning of stock – often at reduced prices. Some important things to know about liquidating a business include the following:

Why liquidate?

Registered companies in severe financial difficulty can decide to claim bankruptcy. Debts and other stakeholders can be paid using cash made from selling the business.

This process offers a way for businesses to settle debts without owners and leaders being personally responsible for costs.

Who requires liquidation in UAE?

Any registered entity can apply for liquidation in UAE, including limited liability companies, free zone companies, and offshore companies.

Entrepreneurs and sole proprietors may not apply for Company liquidation in UAE. Their businesses are not registered entities.

What do you need for a smooth Company liquidation?

The proper Company liquidation steps must be followed for it to be completed efficiently and legally. There is a set number of steps entailed, ranging from the submission of numerous documents to an official notice period.

In the UAE, the process is strictly governed by Legislation. For example, LLC companies are subject to Federal Law No. 2 of 2015 on commercial company’s law, articles from 306 to 326.

This entails 3 steps:
  • Notice of Company’s Dissolution & Appointment of a Liquidator
  • Cancellation of license(s) & cancellation from the Commercial Registration
  • Cancellation of UAE Tax Registration with the Federal Tax Authority (if applicable)
During this period, companies need to obtain bank closure letters, clearance letters from landlords, utility providers, labor departments, FTA, water and electricity departments, and other bodies.

Then a liquidation report is submitted to the DED.

Once all documentation has been reviewed and the final payment to the Department of Economic Development or relevant Authority made, the final License Cancellation Certificate is issued.

Needless to say, accounting plays a crucial role in the Company liquidation process.

Ensuring that books have been carefully prepared and UAE Financial Audits done frequently is a reliable way to ensure that the liquidation proceeds to plan.

If auditing requirements are not met and financial errors or discrepancies arise, it can make UAE Company liquidation become far more complicated. It is also essential to get expert help throughout liquidation to ensure that the process is completed without errors.

Documents need to be gathered and processed carefully to ensure regulatory compliance at every step of the way.

To help you navigate the auditing and FTA requirements needed for Company liquidation, SimplySolved can issue mandatory liquidators’ reports.

We provide a cost-effective, highly efficient service that gives you full support during liquidation.