Company Liquidation in DMCC
UAE is a region that attracts businesses from all across the globe. It attracts investors, entrepreneurs, and businessmen from all the contents of the world. This is all due to Dubai’s business-friendly environment. However, a business-friendly environment does not mean that every business established in the UAE is guaranteed to succeed. Many businesses fail each year; when a business fails, it needs to be wound up. The winding-up process is officially known as the liquidation process.
In the UAE, the liquidation process varies depending on where your business has been established. If you have a company in the DMCC that needs to be liquidated, you need to be aware of all the processes and procedures that you will through. The DMCC has its own company liquidation requirements that you have to go through in order to officially close your business. Free zone company liquidation requirements vary and can be confusing sometimes, this is why a lot of company owners hire professional liquidators to help them in the liquidation process.
Why are Companies Liquidated?
The reasons for liquidating a company are the same no matter where you go in the world. When a business fails -meaning that it is no longer able to pay off its debts and generate enough revenue to function- it undergoes liquidation. Simply put, the liquidation process converts a company’s assets into money so that it can pay off its debts.
Common Reasons for Company Liquidation in DMCC
- Non-compliance with the regulations that govern the companies registered in DMCC
- Non-compliance with federal laws
- Shortage in working capital
- Poor Management
- The company is not able to pay off debts, its liabilities end up to exceed its assets. This is also known as voluntary liquidation
- Creditor’s liquidation or mandatory liquidation when a company is forcibly dissolved so that it can pay off its debts
Regardless of why your company is failing, you must follow the process of company liquidation in Dubai in order to wind-up your business in the DMCC.
Company Liquidation Process in DMCC
As a business owner or partner, you need to be familiar with the liquidation process in DMCC. If you don’t liquidate your company as per the regulations, you will have to face the applicable actions for not dissolving your company.
Types of Company Liquidation in DMCC
There are 4 kinds of company liquidation options present in DMCC:
- Summary Winding Up: when the director(s) of a company announce that a company is in a state where it can be wound up within a period of 6 months.
- Solvent Winding Up: when the director(s) of a company announce that a company is in a state where it can be wound up within a period of 12 months.
- Insolvent Voluntary Winding Up: when a company decides to wind up in order to pay off its creditors.
- Involuntary Winding Up by The Competent Court: this form of liquidation takes place when the DMCC authority itself submits a request to wind up a company. The authority can do this for the following reasons:
a) For a company that has been struck off
b) For a company that has committed a severe transgression of the DMCC’s regulations
The Winding Up Process
In order to liquidate a business in accordance with DMCC’s regulations, you need to fulfill the following requirements:
- Produce a Statement of Insolvency
- Submit a letter of company termination to the authority
- Appoint a liquidator (DMCC approved auditor or a law firm)
After you have fulfilled these prerequisites, you can initiate the liquidation process.
Steps of the Process
- Go to the DMCC portal login and upload all of the documents required there.
- Through the DMCC portal, cancel any active visas, TAC, PIC. You can skip this step if you have already done so.
- Submit all the relevant original documents through the DMCC portal.
- After all the necessary documents have been submitted, the DMCC shall publish the company’s license termination for a period of 14 days. This time period is a grace period in which anyone who has an objection to the company winding-up can notify the authorities.
- A copy of a report produced by the DMCC approved liquidator should be provided as well.
- Once the 14 days’ time period is over and no objections have come up, the company is de-registered.
- After de-registration and license termination, a letter of termination is issued by the authority.
List of Required Documents
- A shareholders’ resolution regarding the company’s liquidation (applicable for companies that are individually owned).
- A board resolution issued by the business’s parent company regarding its liquidation (applicable for subsidiary and branch companies)
- A Certificate of Incumbency with an attestation date of no more than 1 year issued by the parent company. (applicable for subsidiary and branch companies)
- A resolution or request letter stating the appointment of a liquidator. The liquidator being appointed should be from an auditing/law firm in the UAE. (Applicable for individual and subsidiary companies, also for branch companies with assets and financial accounts separate from their parent company).
- A confirmation form issued by the liquidator in response to the request letter (Applicable for individual and subsidiary companies, also for branch companies with assets and financial accounts separate from their parent company).
- Memorandum of Association (MOA), license, share certificates, certificate of registration, and personal secondment agreement.
- An establishment card, if one has been issued.
- Cancellation of all the visas and payment of end of service benefits in line with the regulation that governs the gratuity calculation in UAE.
- A letter of clearance issued by all relevant third-party service providers. The letter must confirm that the business has wound up its account with the service provider and has paid off its final bill.
- NOC from customs (applicable for trading license holders only).
- A letter of clearance from the landlord (applicable for businesses with physical offices).
- Clearance letter from all 3rd party authorities as needed. Only applicable for businesses that are being regulated by 3rd party authorities.
- NOC from assets management and community property.
- Cancellation of all PICs, TACs, and visas issued under the company’s license.
- A liquidation report and audit report furnished by the appointed liquidator.
Businesses need to follow the regulations set by DMCC in order to wind up their businesses properly. These guidelines are explained in detail on DMCC’s website. DMCC has made the appointment of a UAE based liquidator compulsory. This requirement makes sure that businesses are being guided and assisted by a professional who is well-versed with DMCC’s liquidation process.
Why Push Digits Chartered Accountants?
Push Digits is a DMCC approved liquidator and auditor. We have helped a massive amount of businesses to liquidate their companies in DMCC and all other free zones and the mainland. We demand from you bare minimum and most relevant documents that are mandatory from regulation’s perspective and we dissolve your company in a matter of weeks which is why we are very popular in DMCC. Here’s how Push Digits can make the liquidation process easier for you:
- Provide you with guidance regarding the documents that you need to prepare.
- Help you arrange and submit all relevant documents.
- Provide you with an experienced DMCC approved liquidator.
- Conduct an audit for your company and prepare an audit report.
Push Digits is experienced in a variety of financial services. With our help, you can liquidate your company as smoothly as possible.