Businesses across the world are starting to feel the strain of COVID-19. Dubai and the UAE have implemented strict protocols and guidelines for the re-opening of businesses to help business owners, improve the economy and adapt to the current client. Currently we are in the Holy month of Ramadan (which is typically a quieter month on the business front). This combined with the limitations on the population’s movement; businesses are preparing for the worst. Some business owners are concerned that conditions might not return to “normal again” or they are apprehensive as to what will be a “new normal”. Food and beverage sectors e.g. restaurants reveal it is now potentially costing them more to re-open their doors than it would to stay closed. There is the strain of operating costs to cover, payment of salaries and they have no choice but to purchase products and supplies etc. to keep their businesses operating. Yet there are little to no customers and businesses are finding it hard to survive and keep their heads above water. We expect to see other businesses lose more money by being open rather than remaining closed over the next 1-2 months.
We are beginning to see an increasing number of enquiries regarding company closure. If you are facing difficulties perhaps it is time to re-evaluate your business and decide if closing a company is the right option. So, when is it a good time to draw a line in the sand and close shop? Below we list the processes for company liquidation and business closure.
If you are contemplating whether you should close your business, it is recommended to complete a business evaluation by the experts. Regardless of the type of business you own in Dubai and the UAE, you must formally cancel your business licence and formally close all the associated permits etc. linked to the company. It is vital for the associated government entities to be formally informed that you will no longer be in business and will liquidate your company. The sooner you notify your licensing authority the better. This way you will avoid unnecessary fines and penalties incurred upon your trade licence if it is not renewed upon the expiry date.
It is important that as a shareholder of the company you discharge your liabilities towards creditors and partners as this will protect your interests and shares. Goodwill, business ethics and reputation must be in perspective, particularly if you decide to enter a new business venture and form a new Dubai business in the future.
UAE and Dubai company closure process can be lengthy. There is a lot of paperwork, legal proceedings and dealing with several government departments and UAE authority approvals. We recommend seeking the help and services of a well experienced Business Consultant as this will cause you less hassle, save time, and allow the ability to wind-up at a much greater speed.
The process of cancelling a business licence will depend on the structure of your company. For sole establishments, the process is much more streamlined. The first step is the cancelation via Dubai Economic Department (DED). Following on, you will need to complete the clearances from the main government departments such as:
Whereas, companies with shares, the process takes longer. The shares of the company must be liquidated, collection of debts and payment of creditors need to be completed before finalising with the licensing authority.
Companies that are looking to close and require the appointment of a liquidator include:
With most company types there are normally, two stages set out to complete the liquidation process.
Since there are more than 50+ free zone types the rules and regulations may vary from free zone to free zone. Therefore, the company closure and liquidation processes and length of time it will take to complete also vary. It is important to note certain free zones may require several months’ advance notice to vacate business facilities and to not renew the company licence. This is set out in the company’s licensing and regulations. Therefore, if a company wishes to close it must notify the free zone in advance to comply with regulations. For example, under Jebel Ali Free Zone Authority (JAFZA) should a company which to liquidate it must notify the authorities at least 3 months’ in advance prior for the office and warehouse facility and at least 6 months’ prior for plot facility.
Following on, the liquidation process will commence and follow most of or all of stage 1 and 2 as mentioned above.