Liquidation refers to the steps conducted before the company closes or deregisters. It includes liquidating the company’s assets. KSP officials excel in offering company liquidation services in Dubai. Right after the liquidation Board Resolution, our team will begin your financial audit and prepare the liquidation report.
At its core, the liquidation concept is based on the provisions of Federal Law No. 2 of 2015 on Commercial Companies. These provisions are followed in the liquidation process unless and until the company’s Article of Association or Memorandum of Association specifies some special additional provisions or provisions against the 2015 Law.
Liquidation Types
Liquidation can be either compulsory or voluntary. If a dispute happens between the shareholders and one of them or all request a liquidation process via court, the liquidation is considered compulsory. Here, the court will decide the liquidation method to opt for and appoint a formal liquidator, too. However, voluntary liquidation is one in which shareholders agree to liquidate the company and appoint a special liquidator via resolution.
Note: Once the liquidation process begins, this can’t be terminated by death or the insolvency ordered against the partner. This rule remains valid even if the shareholders themselves appoint the liquidator.
Key Requirements of the Liquidation Process
The following are the key requirements of the voluntary liquidation process; let’s examine them! Compulsory liquidation requirements vary depending on the method suggested by the court.
- The company should pass the resolution for liquidation approval and liquidator appointment.
- Clearances must be obtained from the Emirates Post, SEWA, telecommunication provider, and other relevant authorities.
- The company is bound to publish notices or advertisements in the local daily newspapers for at least 45 days.
- The appointed liquidator must submit the liquidation report to the licensing authority.
Once the liquidation process is completed and the liquidator has submitted the liquidation report, the licensing authority will issue a liquidation certificate announcing the company’s closure.
Legal Implications and Liability
Practically, any company can be deregistered without the liquidation process or liquidator, as preparing a liquidation report is unnecessary. Other legalities in this case include the following:
Dissolution and the Liquidator Appointment
If you are not going into the liquidation process to prepare the liquidation report, you must consider whether there’s still a need to appoint a liquidator. Another question you might think of is whether there is a need for dissolution or liquidation if the company has already been deregistered.
Owing to the Article 308 of the 2015 law:
Liquidation must be conducted by the liquidator (s) appointed under a decision by the General Assembly or by the partners with the assurance that the liquidator isn’t the company auditor, nor has he or she audited the company accounts within five years before the appointment.
Another question is about the liabilities and roles of the shareholders and managers. Moreover, the role of the licensing company and the extent of legal intervention are also questioned. Coming to the answer, be clear that certain liquidation steps can’t be completed without a permit from the licensing authority. For example, when publishing an advertisement in a newspaper, a publication request must be sent via the relevant licensing authority.
Notification of the Company’s Creditors
According to the Article (316) of 2015 law:
Upon the company’s, all the debts payable by the company shall become immediately outstanding. The liquidator is responsible for sending registered letters to the creditors with acknowledgment receipt of the liquidation commencement, inviting all the creditors to present their claims.
The same notice will be published in two local daily newspapers; one notice must be published in Arabic. In all instances of liquidation, the liquidation notice will grant creditors at least 45 days from the date of notice. Creditors can’t present their claims after this span.
In case of deregistration, creditors aren’t notified, raising concerns about the liability of shareholders and managers towards the company’s creditors. Therefore, the deregistration route must be opted with caution if you want to avoid any scenario setting managers and shareholders liable to any creditor(s) or third-party (ies).
In short, liquidation remains daunting, yet it is a more reliable approach for ending any company’s journey in the market. If you plan on liquidating your company, consult with KSP’s liquidators. With them, you can ease the entire liquidation process without falling for any illegalities and following all the liquidation standards. Contact us now to get personalized assistance!