What You Should Know About Liquidation of a Company in the UAE

Liquidating a company in the UAE is a critical decision that involves navigating through a complex web of legal, financial, and administrative procedures. Whether the liquidation in the UAE is voluntary or compulsory, it must be executed in accordance with UAE laws, overseen by relevant regulatory bodies like the Federal Tax Authority (FTA), Ministry of Economy, and free zone authorities. This guide explores the company liquidation process in depth, the different types of company liquidation in UAE, the importance of a liquidation audit, the required documents like the final liquidation report and license cancellation certificate, and how Young and Right, a leading liquidation company in UAE, can guide you from initiation to closure.

Types of Company Liquidation in the UAE

Businesses in the UAE can be liquidated in two primary ways:

1. Voluntary Liquidation

Voluntary liquidation occurs when the company’s shareholders or directors choose to dissolve the business by passing a shareholders resolution. Reasons may include poor financial performance, change in business strategy, or retirement. This applies to limited liability companies, sole establishments, offshore companies, and free zone companies. Key Steps:

• Pass a board resolution.

• Appoint a licensed liquidator.

• Submit the resolution to the relevant licensing authority or free zone authority.

• Settle all outstanding debts and liabilities.

• Close bank accounts and obtain a clearance letter from the transport authority, immigration department, and human resources departments.

• Prepare the final liquidation report and obtain a liquidation certificate.

2. Compulsory Liquidation

This form of compulsory company liquidation is ordered by a court due to insolvency or legal violations. It is often initiated by creditors or government authorities when a company fails to pay its outstanding liabilities. Key Involvements:

• A court-appointed liquidator manages the company’s asset sales and debt settlements.

• Regulatory involvement from bodies like the Federal Customs Authority, economic development departments, and free zone authorities.

• More legal complexity and longer notice period compared to voluntary liquidation.

The Role of Liquidation Audit in the UAE

An essential step in the UAE company liquidation process is the liquidation audit, which ensures compliance with financial regulations, labor laws, and tax rules laid out by the Federal Tax Authority.

Key Responsibilities of a Liquidation Audit:

Assessment of the Company’s Assets and Liabilities Ensures a proper valuation and documentation of the company’s debts, properties, and bank accounts. Verification of Debt Settlement Prioritizes repayments—first to secured creditors, then unsecured creditors, employees, and government dues. Tax and VAT Compliance Verifies all corporate taxes, VAT returns, and payments. Supports VAT deregistration and clearing of any fines or penalties. Regulatory Compliance Aligns with the UAE Commercial Companies Law, UAE labor law, and relevant UAE embassy guidelines for foreigners affairs. Preparation of the Liquidator’s Report This final document summarizes all activities and must be submitted to the free zone or mainland authority.

Step-by-Step Guide to Company Liquidation in the UAE

Whether you're operating on the mainland or within UAE free zones, here's a breakdown of the company liquidation steps:

Step 1: Board or Shareholder Resolution

A legal form resolution is passed by the company’s shareholders to authorize the closure. It must be notarized by a notary public.

Step 2: Appointment of a Liquidator

A registered liquidator in Dubai or UAE is appointed to supervise the process and create a liquidation report.

Step 3: Public Announcement

Publish a liquidation notice in two local Arabic newspapers. This opens a notice period (typically 45 days) during which creditors can raise objections.

Step 4: Settle Debts and Liabilities

The company must settle outstanding debts with:

• Employees

• Government bodies (e.g., Federal Tax Authority, transport authority)

• Suppliers and leasing entities

Step 5: Cancel Trade License and Permits

• Cancel the trade license with the Department of Economic Development (DED).

• Inform the specific free zone authority if applicable.

• Obtain license cancellation certificate and clearance letters.

Step 6: Tax Clearance and Final Audit

• Submit final tax filings to the FTA.

• Ensure all VAT obligations are settled.

• Prepare and submit the final liquidation report.

Step 7: Deregistration with Authorities

• Apply for deregistration at the trade registry, MOE, or relevant free zone authority.

• Finalize the provisional liquidation certificate and the liquidation certificate.

Tax and FTA Considerations in Company Liquidation

During company liquidation in Dubai or other emirates, tax compliance is critical to avoid penalties:

1. VAT Obligations

All VAT returns must be filed and paid before applying for VAT deregistration.

2. Corporate Tax Compliance

Ensure that corporate tax returns and payments (if applicable) are finalized.

3. Final Tax Filings to the FTA

The Federal Tax Authority must receive documentation proving that no tax liabilities remain.

4. Deregistration and Clearance

Deregister the tax account and obtain an FTA clearance certificate.

Liquidation Services in Dubai and Across the UAE

Liquidating a company in Dubai or other Emirates like Abu Dhabi or Sharjah requires detailed coordination with government authorities, free zones, and tax departments. At Young and Right, we specialize in providing company liquidation services across the UAE. Whether you're closing a mainland company, free zone company, or offshore company, we offer end-to-end support.

How Young and Right Can Help You

Here’s how we support businesses in UAE from beginning to end:

1. Free Consultation

Get clear, actionable insights into the process of company liquidation based on your business license type and legal structure.

2. Tailored Liquidation Planning

We draft a customized plan, manage document submissions, and liaise with relevant authorities for smooth execution.

3. Full Audit and Compliance Services

From preparing the liquidator's report to managing license cancellation, we handle everything.

4. Settlement of All Obligations

We coordinate with leasing entities, banks, FTA, and labor authorities to settle every liability and get all clearance letters.

5. Deregistration and Final Closure

We ensure your business licence is canceled, and the company’s bank account is closed legally. We provide the final liquidation report and ensure deregistration is approved.

Conclusion

The company liquidation process in the UAE is not just about shutting doors—it’s a legally binding closure of a business entity, demanding compliance with all applicable regulations. From trade licence cancellation to liquidation audit, every step must be executed with precision. Young and Right offers reliable and professional liquidation services in Dubai and across the UAE. Our team of experts ensures that your business is closed legally, efficiently, and in full compliance with UAE laws. Thinking of closing your company? Let Young and Right take the stress off your shoulders. Contact us today to schedule a consultation and begin the smooth and compliant company liquidation process.