Liquidation of companies in UAE mainland vs. free zone

The United Arab Emirates (UAE) offers diverse options for individuals and businesses looking to set up a company. The process of Liquidation of companies in UAE  may take 45 to 50 days if other requirements and formalities are executed on time. A free zone will have a window solution to close down the company whereas the mainland company has its clearances from multiple departments which are in various locations. When considering the liquidation of companies in the UAE it is essential to understand the differences between mainland and free zone company formations. Both types of companies have their unique features, advantages, and considerations.

Mainland Company Formation: Mainland companies can establish their offices in any location within the UAE, providing greater flexibility regarding office space and geographical presence. These companies now can work without Emirati partners except for a few business categories. Mainland companies can conduct business within the local UAE market without any restrictions.

Free Zone Company Formation: Free zone companies offer 100% foreign ownership, allowing investors to have full control over their business operations. Free zone companies enjoy tax exemptions and other financial incentives. Free zone companies are authorized to trade only within the free zone and outside the UAE. 

When liquidating a company, the process and requirements may vary depending on the type of company formation. It is important to consult with legal and financial advisors to ensure a smooth and efficient liquidation process.

What is Liquidation?

Liquidation is the process of bringing a business to an end and distributing its assets to claimants, which usually occurs when a company becomes insolvent, meaning it cannot pay its obligations when they are due. There are several types of liquidation, including:

• Creditors Voluntary Liquidation: This occurs when a company cannot pay its debts and the directors voluntarily involve the company in the liquidation process.

• Compulsory Liquidation: This happens when a company cannot pay its debts, and the directors apply to the courts to force the company into liquidation.

• Members’ Voluntary Liquidation: This type of liquidation is used when a company can pay its debts but the directors want to close the company.

During the liquidation process, the remaining assets are used to pay creditors and shareholders based on the priority of their claims. The term “liquidation” can also refer to the selling of poor-performing goods at a price that allows the company to meet its financial obligations.

Liquidation Process For  Mainland Companies in the UAE:

The liquidation process for mainland companies in the UAE can be divided into two stages: preparation and execution. Here are the steps involved in each stage:

Preparation Stage: Gather essential documents: Prepare the following documents for your mainland company in the UAE:

• Copy of your business license (renewed if expired)
• Memorandum of Association (MOA) with any changes made
• Power of Attorney (if applicable)
• Copies of all shareholders’ passports
• Shareholders’ resolution
• Copies of Emirates ID
• Deregistration application
• Liquidation notice period

Execution Stage:

Draft and accept a dissolution resolution: The shareholders of the company draft and approve a resolution to dissolve the company. For Limited Liability Companies (LLCs) incorporated in the UAE.

Appoint liquidators: If the company is being liquidated voluntarily, the shareholders must appoint liquidators to carry out the process.

Settle liabilities: During the liquidation process, all the company’s assets are utilized to settle its outstanding obligations.

Resolve disputes: In cases where there are disputes or conflicts among shareholders or within the company, liquidation can provide a structured mechanism to resolve these issues and distribute the company’s assets.

Distribute remaining assets: If any assets remain after all the liabilities are resolved, they are sold, and the proceeds are distributed among the company’s directors and shareholders.

Liquidation Process For  Free Zone Companies in  UAE:

Liquidation of companies in UAE, the liquidation process typically involves the following steps:

• Prepare a Board Resolution
• Fill up applications and letters
• Return all original documents to the free zone
• Obtain clearance certificates from the relevant free zone authority and business unit
• Once the request is approved, the process of dissolution will commence
• Submit a cancellation request and resolution for liquidation to the relevant free zone authority
• When the company is discharged of all its liabilities, the free zone authority will issue a clearance certificate for the company

It is essential to comply with all the regulations set out by the free zone authority to ensure a smooth liquidation process. Hiring experienced company liquidators in the UAE can be an ideal solution to close down a company with ease.

Role of a Liquidator in the Liquidation Process in UAE:

The role of a liquidator in the liquidation process in the UAE is to oversee the winding up of a company’s affairs, including the sale of assets to pay off creditors and distribute any remaining funds to shareholders. Liquidator role include: 

• Confirmation of a liquidator’s appointment
• Take stock of assets and liabilities
• Issue an official letter of acceptance
• Prepare a statement of affairs and a liquidator’s report
• Ensure the liquidation process follows UAE laws
• Notify creditors
• Settle legal disputes
• Dissolve the company and remove it from the register
• Oversee the liquidation procedure and confirm its adherence to the law

How does BRISK help you in Company Liquidation in UAE?

BRISK can help you in the company liquidation process in the UAE by providing the following services:

• Offers assistance in appointing an authorized liquidator to oversee and ensure compliance with UAE laws during the liquidation process
• Facilitates the preparation of essential liquidation documents, including a statement of affairs, a liquidator’s report, and clearance letters from relevant authorities
• Assists in notifying creditors about the company’s liquidation intent, providing a specified period for them to file their claims
• Ensures compliance with all legal requirements and regulations in the UAE during the liquidation process
• Help in obtaining court approval, when required, for the liquidation process, especially in cases of compulsory liquidation

By working with BRISK, you can simplify the company liquidation process in the UAE and ensure that it is carried out efficiently and effectively.