Closing a company in the UAE. Liquidation process.

Closing a company in the United Arab Emirates is a rather complex process that requires detailed planning and thorough preparation. There is no single procedure for closure because the specifics and conditions depend on the type of company and its location. Typically, it is necessary to obtain permits from the competent authorities, settle all debts, fulfill obligations, and only at the very end submit the relevant application along with a package of necessary documents, as well as close corporate accounts. Moreover, abandoning an unnecessary company and refusing to close it to save on liquidation procedures is definitely not advisable, as this can lead to a series of unfavorable legal consequences in the future.

Primary Reasons for Liquidating a Company in the UAE

UAE legislation does not restrict entrepreneurs' right to close a registered company. There is no need for weighty reasons or circumstances for the liquidation of a company; the mere expression of the founder's will is sufficient.

The main (possible) reasons for liquidating a company in the UAE include:

- Achieving the goals originally set when the company was opened.

- Infeasibility of continuing the business, leading to increasing losses.

- Actual cessation of entrepreneurial activity.

- Change of residence, relocation to another country.

- Any other circumstances, including personal or family reasons.

The reasons for ending a business in the UAE can vary, but if further entrepreneurial activity is not planned, the legal entity should definitely be closed.

Sometimes founders deliberately abandon their companies, wishing to save on liquidation procedures, or simply forget about them due to lack of need. Such situations are quite risky because even if the company is removed from the registry due to license cancellation, the legal liability of the founders does not disappear. Penalties accumulate for overdue and untimely extended founding documents.

Therefore, when the need arises to terminate the activities of a legal entity, regardless of the reasons for this, it is important to prepare and plan for the organized closure of the company.

Documents Required for Closing a Business in the UAE

To close a company in Dubai or any other emirate of the UAE, all founding documents of the company will be required:

- Business activity license

- Memorandum of Association and resolution of the founders

- Minutes of the general meeting of owners confirming the decision to liquidate the company and appointing a liquidator responsible for the liquidation procedure

- Liquidation application forms in the prescribed format

The provided list of documents is indicative and may vary depending on the specifics and circumstances of the company's liquidation in a particular case. For example, a mandatory condition for closing a company in Mainland UAE is the cancellation of the license. The procedure for this depends on the organizational and legal form of the company. Enterprises and individual entrepreneurs need to submit the appropriate application to the authorized department. Additionally, permissions from the Department of Residency and Foreign Affairs, the Ministry of Human Resources and Emiratization, and some other authorities will be required. Companies with shareholders need to further confirm the liquidation of shares, which further complicates the procedure and involves the submission of relevant documents.

In turn, closing a company in a free zone in the UAE, such as in Dubai, is carried out according to the rules established in a particular zone.

Cost of Closing a Company

The United Arab Emirates is a developed country with a high standard of living and corresponding prices for various services of government authorities.

Depending on the region of registration of the company and some other factors, the amount of the government fee for the conducted liquidation can reach up to $3000.

However, refusing to liquidate the company when further business operations in Dubai or any other emirate of the UAE are not planned is definitely not advisable.

Deciding not to carry out liquidation when it is necessary carries huge risks. In certain cases, entrepreneurs may be held liable and fined significantly, with interest accruing over time in case of non-payment. Additionally, legal problems may arise, leading to a ban on further stay in the UAE and entry into the country in the future.

As a result, the adverse consequences and costs that arise will far exceed the expenses for conducting all liquidation procedures in accordance with the requirements of UAE national legislation.

Timeline for Company Liquidation

The timeframe for company liquidation depends on numerous factors. Primarily, the organizational and legal form of the business, the region of registration, the number of employed staff, the number of open bank accounts, and other accompanying circumstances influence the duration of the entire procedure. On average, the process of complete liquidation of a legal entity in the UAE takes from several months to a year.

To shorten the overall duration of company closure, it is advisable to engage in careful preliminary preparation. Therefore, liquidation should only be commenced after fulfilling all obligations, settling company debts, and arranging the necessary documents.

Risks and Problems That May Arise

Before commencing the liquidation procedure, it is essential to ensure that there are no claims against the company from other organizations and individuals. Otherwise, during the closure, third parties may start asserting their claims, complicating and delaying the entire process.

Issues may also arise concerning corporate loans that have been arranged. If the company was not liquidated in accordance with the law, there is a risk that the bank will continue to accrue interest, which over time may lead to a significant increase in the overall debt.

To avoid mistakes and successfully liquidate a legal entity in Dubai or any other emirate of the UAE, seek assistance from Make Fortune company. We will prepare all necessary documents, obtain permissions from authorized government agencies, and smoothly close your company.