Company Liquidation in DAFZA
The primary purpose of any business is to generate revenue. Businesses need to produce money in order to function and achieve any goal that the business owners have in mind. When a business’s ability to produce money becomes compromised, it runs into all sorts of troubles. Its cash flows are disrupted, making it hard for the business to function normally. In the worst-case scenario, a business with money troubles reaches a point where it is unable to pay off its liabilities. When this happens, the business becomes insolvent. A business that becomes insolvent eventually becomes a burden for its shareholders and creditors. This is why insolvent businesses are liquidated.
Liquidation a company involves converting a business’s assets into cash in order to settle its debts. It’s a systematic process, at the end of which the company in question is shut down. While the general method of liquidation is the same everywhere in the world, the rules and regulations regarding it vary from place to place. In the UAE, every free zone has its own regulations regarding company liquidation.
Companies in the Dubai Airport Free Zone (DAFZA) need to follow the local authority’s regulations when they are undergoing liquidation. Since every free zone has a different set of requirements for company liquidation, free zone company liquidation can be complicated. Fortunately, businesses in the UAE can always hire professional third-party help for assistance in their liquidation process. In DAFZA, hiring a professional liquidator for guidance and oversight is actually a requirement set by the authority.
Company Liquidation Process in DAFZA
Business owners need to go through a number of steps in order to liquidate their company. The purpose of all these regulations is to inform the authority of the company shutting down. They also help to ensure that all the parties related to the company get to settle their affairs before the company stops existing.
As a business owner wanting to liquidate your DAFZA company, here’s what you need to do:
- Shareholder/Board Resolution: Before you begin the liquidation process, you must issue a formal statement regarding your intent to liquidate your company. This statement is issued in the form of a shareholder/board resolution. This resolution has to be acknowledged by all owners of a company and should be attested by the Notary Public as well.
- Appointment of a Liquidator: A third party liquidator has to be appointed in order to monitor the liquidation process. The appointed liquidator has to accept an official request letter from the company and if they decide to provide their services to the company, they must submit an official letter of acceptance.
- Public Announcement of Liquidation: When a company initiates its liquidation process, it has to publish an advertisement in the local newspaper. This advertisement is circulated for 45 days, announcing the company’s intent to liquidate itself. During these 45 days, anyone who has an objection against the company can come forward.
- Branch and VAT De-registration: This applies to companies that have branches and/or have registered for VAT. Before they wind up, these companies must make sure that all their branches have been closed down. De-registering for VAT is a crucial step for company liquidation. In DAFZA, companies have 20 business days to de-register for VAT after they have begun the liquidation process. Failure to de-register within these 20 business days can lead to a fine of AED 10,000 being imposed on the company. Once the business is de-registered, trn check step should be performed to ensure FTA has updated the records.
- Proof of Clearance from Customs and Service Providers: Your company has to obtain clearance documents from every service provider. This acts as proof that the company has paid its final bills with every service provider. Proof of clearance from Dubai Customs is required as well.
- Bank Account Closure and Visa Cancellation: Your company has to close its bank account and also cancel all visas that were issued under your business license.
- Liquidator’s Report: The final step of the process is to submit a liquidator’s report. This report is compiled by the appointed liquidator and includes details of the company’s assets and liquidation process.
Once all the above-mentioned requirements have been met, companies can submit their documents to the DAFZA authority. Upon acceptance of all documentation, the company is cleared for winding up. Its license is terminated and it is officially shut-down.
It should be noted that if a business’s license is already expired at the time of liquidation, it must first renew its business license. Trying to proceed with an expired business license can lead to you being fined by the authority.
List of Required Documents
Here are all the documents that need to be arranged throughout the liquidation process:
- Shareholder/Board Resolution, Attested by The Notary Public.
- Letter of Appointment Presented to Liquidator Hired by The Company.
- Letter of Acceptance from The Liquidator Submitted to The Company.
- Bank Closure Letter
- Clearance Documents from Dubai Customs
- Clearance Documents from Relevant Service Providers
- Liquidator’s Report
Getting all the documents ready and following DAFZA’s regulations takes a lot of effort. Any mistake or oversight can lead to your liquidation process delayed. In case of more serious mistakes, you could even be fined by the authority. In order to have a trouble-free company liquidation, you should enlist the services of a reputable company liquidator.
Push Digits Chartered Accountants has been helping businesses take care of their liquidation for over a decade. We are known for reliable company liquidation services across the UAE. With our assistance, you can comply with all the regulations set by DAFZA. We will manage end to end process and work with you side by side until you get the liquidation certificate from the regulator.