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A Guide To Liquidation Of Companies

Jan 5th, 2019 / Haroon Juma / Accounting Blogs

Liquidation

 

When any business can no longer afford to operate, liquidation is a formal process done by an approved firm to ensure the business meets its obligations to shareholders and other stakeholders (e.g. debtors, employees, Government entities).

In this guide, we take a closer look at liquidation to detail what it entails and how to proceed.

What You Need to Know About Liquidation of Companies

What exactly is the liquidation of companies?

In essence, business liquidation is the process of ending the business and distributing the various assets from the business to claimants. Businesses are then able to claim bankruptcy.

It can also involve the selling or auctioning of stock – often at reduced prices. Some important things to know liquidating a business include the following:

Why liquidate?

Registered companies in severe financial difficulty can decide to claim bankruptcy.

Debts and other stakeholders can be paid using cash made from selling the business.

This process offers a way for businesses to settle debts without owners and leaders being personally responsible for costs.

Who requires liquidation in UAE?

Any registered entity can apply for liquidation in UAE, including limited liability companies, free zone companies, and offshore companies.

Entrepreneurs and sole proprietors may not apply for liquidation. Their businesses are not registered entities.

What do you need for a smooth liquidation? 

The proper liquidation steps must be followed for it to be completed efficiently and legally.

There is a set number of steps entailed, ranging from the submission of numerous documents to an official notice period.

In the UAE, the process is strictly governed by Legislation. For example, LLC companies are subject to Federal Law No. 2 of 2015 on commercial company’s law, articles from 306 to 326.

This entails 3 steps:

  1. Notice of Company’s Dissolution & Appointment of a Liquidator
  2. Cancellation of license(s) & cancellation from the Commercial Registration
  3. Cancellation of Tax Registration with the Federal tax Authority (if applicable)

During this period, companies need to obtain bank closure letters, clearance letters from landlords, utility providers, labor departments, FTA, water and electricity departments, and other bodies.

Then a liquidation report is submitted to the DED.

Once all documentation has been reviewed and the final payment to the Department of Economic Development or relevant Authority made, the final License Cancellation Certificate is issued.

Needless to say, accounting plays a crucial role in the liquidation process.

Ensuring that books have been carefully prepared and audits done frequently is a reliable way to ensure that the liquidation proceeds to plan.

If auditing requirements are not met and financial errors or discrepancies arise, it can make liquidation become far more complicated.

It is also essential to get expert help throughout liquidation to ensure that the process is completed without errors.

Documents need to be gathered and processed carefully to ensure regulatory compliance at every step of the way.

To help you navigate the auditing and FTA requirements needed for liquidation, Simply Solved can issue mandatory liquidators’ report.

We provide a cost-effective, highly efficient service that gives you full support during liquidation.

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As an FTA Accredited Tax Agency with ISO 9001 Quality & 27001 Information Management Certification, we offer a quality-based approach to our services supported by dedicated team of certified professionals.

We support our clients with defined processes, platforms and expertise to deliver advisory, project and outsourced services in Accounting, Tax, Auditing, HRM, IT & Marketing. Our offerings are specially designed to meet the UAE Regulations to put you in control of your information, comply to the regulations and help you make better business decisions.

 

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