Company Liquidation in Dubai – Limited Liability Company (LLC)

Dubai is an ever-growing business destination and a huge number of entrepreneurs have made the best out of the business opportunities here. However, not all can achieve their business goals and some of them fail to sustain their business growth. In such cases, the entrepreneurs or investors may opt for the process of company liquidation in Dubai. As per Federal Law No.2 of 2015, article 306 to 326, an LLC in Dubai mainland may go into liquidation when it completes its objective; its duration is expired or suffers a loss of assets. The liquidation process is as crucial as the company formation and the businesses need to hire a one-stop-shop business setup consultant that also offers company liquidation service in Dubai.

Initiating the LLC Company Liquidation Process in Dubai Mainland

As per the Federal Law No.2 of 2015, there are two scenarios when an LLC in Dubai mainland can call for dissolving the company.

  1. When the Losses Reach Half the Capital

In this case, the Managers or the directors of the LLC are required to put forward the issue of dissolution before the General Meeting of the partners. The applicable majority will then pass the decision to liquidate the company.

  1. When the Losses Reach 3 quarters of Capital

In this situation, a demand to dissolve the company would be put forward by the partners who hold one-quarter of the capital.

Appointment of Liquidator for Dissolving the Dubai Mainland LLC

The LLC is one of the legal structures that require the appointment of liquidators to dissolve the company. One or more liquidators can be appointed as per the decision of the General Assembly of the LLC partners.

Why the Cancellation of LLC License in Dubai Is Important for Liquidation Process?

The cancellation of the trade license is a major step in the liquidation process of an LLC company in Dubai. The cancellation process lets the government authorities know that the company is no longer doing business in Dubai. By cancelling the trade license, the LLC can avoid the accumulation of fines on the license for not renewing it on the date of expiry.

The entrepreneurs need to ensure that they have to discharge their liability towards the creditors and partners in the company. If the business owner has plans to set up a new business in the future, the cancellation of the license helps to sustain the goodwill and reputation of the business.

For cancelling the business license, an application should be submitted to the Dubai DED. In addition, clearances should be obtained from the following departments:

  1. Ministry of Human Resources and Emiratisation
  2. Directorate of Residency and Foreigners Affairs
  3. DEWA
  4. The leasing entity

Key Stages in the Company Liquidation Process in Dubai Mainland

The process of winding up an LLC in Dubai mainland involves two stages:

Stage 1

  • Prepare the Partners/Shareholders’ Resolution that confirmed company liquidation & appointment of liquidator
  • Notarisation of the Resolution by Notary Public
  • Arrange a formal acceptance letter by a registered liquidator
  • Apply for initial approval of the cancellation of license through DED
  • Issuance of liquidation certificate by the DED
  • Publish liquidation notice in 2 local Arabic newspapers
  • The notice gives the debtors a grace period of 45 days from the date of publication of newspaper notice

Stage 2

  • The liquidator and the LLC partners need to prepare a declaration letter that there was no objection from any party during the grace period and the letter should be submitted to DED
  • Obtain approvals from relevant authorities to cancel the license
  • Ensure the cancellation of the establishment card at the Ministry of Human Resources and Emiratisation
  • Ensure the cancellation of the foreign partners’ visas sponsored by the LLC at the respective General Directorate of Residency & Foreigners Affairs
  • All the above documents need to be submitted to obtain approval for the final cancellation
  • Obtain the certificate of cancellation after paying the fees (the fee will be determined by the DED)

Is VAT Deregistration Required for Company Liquidation Process?

VAT deregistration is mandatory for the taxable companies in Dubai when they decide to liquidate. An LLC is required to apply for VAT deregistration with the Federal Tax authority (FTA). The FTA will deregister the VAT registration once the application is submitted with all the required documents. The companies that are winding up the business would incur penalties if they fail to apply for VAT deregistration.

 

Transfer the Existing Trademark of the Company before Liquidation

Trademarks are one of the most valuable assets a company can own and therefore registered trademarks carry immense significance during the insolvency of a business entity in Dubai. Before the LLC liquidation, the registered trademarks of the company should be transferred to a new owner or entity.

Documents Required to Wind up a Limited Liability Company in Dubai

  1. Application form duly signed by all the shareholders in the company
  2. Trade License of the company
  3. Passport copies of all the shareholders/manager
  4. Original Memorandum and Article of Association of the LLC
  5. Original Shareholders resolution to liquidate the company (attested by notary court)
  6. All visas have to be cancelled and No-objection letter required concerning cancellation issued by the Ministry of Labour & Social Affairs.
  7. Release letter from the landlord in favour of the licensees
  8. Liquidation report from a certified Chartered Accountant
  9. Letter from the bank to confirm closure of Bank Account
  10. NOC/Clearance letter from DEWA / Etisalat and customs
  11. NOC/Clearance letter from the Immigration Department
  12. Notification from the Federal Tax Authority (FTA) cancellation of the VAT account
  13. Advertisement of Liquidation will be published in 2 local Arabic Newspapers and the waiting period for the same will be 45 days
  14. A letter confirming the approval of liquidator

Why Choose Jitendra Business Consultants?

A company will be forced to wind up its business in Dubai when it fails to sustain the growth or a continuous decline in profits. If the losses are accumulating, the businesses will be forced to go for the company liquidation process. However, just like the incorporation process, expert guidance is required for the company’s insolvency procedures as well. The processes including cancellation of license and VAT deregistration require the assistance of a reputed company liquidation service provider in Dubai, UAE. Jitendra Business Consultants (JBC) is one of the top company liquidation service provider in Dubai with years of experience in helping businesses in insolvency procedures. JBC’s highly qualified company liquidators will be assisting the LLCs in all steps like cancellation of license, deregistration of VAT account and will ensure that all the documentation is in proper order for a quick and smooth liquidation process.

If you need additional assistance or have any questions, please contact the following:
Email: legal@jitendragroup.ae
Tel: +971 4 343 8022

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