One can say without a doubt that Jebel Ali Free Zone (JAFZA) is one of the best free zones in Dubai as it is home to more than 7,500 companies from over a hundred countries. Yet, investors who plan to start their business in the free zone are advised to create an exit strategy right from the get-go as the process of company liquidation in JAFZA may appear to be complex and time-consuming. With the introduction of Economic Substance Regulations (ESR) and Ultimate Beneficial Ownership (UBO) law, the investors are forced to tackle additional challenges while winding up a company in the UAE.
In this blog, we will equip you with the right tools to navigate the complex steps of company liquidation in Dubai free zones such as JAFZA. However, consulting with accredited company liquidators in Dubai is the best way to wind up your company with less struggle. Read on to get to know the conditions, requirements and steps involved in the process of company liquidation in JAFZA.
The decision to Commence JAFZA Liquidation
The first step of company liquidation in JAFZA starts with a decision made by the shareholder or shareholders to wind up the company. The decision by the shareholders should be in the form of a board resolution which must be notarized by the Notary Public. If the company in liquidation is the branch of an overseas company, then the Board Resolution of the parent entity must be submitted to the JAFZA. The Board Resolution should be notarized by Notary Public & Attested by the UAE Embassy in the country of origin and Ministry of Foreign Affairs in UAE.
Appointment of Company Liquidator
The Board should appoint an official liquidator who would oversee the closure of the company in JAFZA. The liquidator can be an accredited audit firm operating in the UAE. The shareholders should notify the free zone authority about their decision to liquidate the company and the appointment of the liquidator. Hire the best company liquidators in Dubai to make your company liquidation process hassle-free.
Exit Interview with the Free Zone Authority
Unlike most other free zones in the UAE, JAFZA conducts an exit interview with the shareholders once the board resolution is submitted. The exit interview will be conducted by the Customer Relations officials at JAFZA. You can prepare for the process by availing yourself of efficient company liquidation services in Dubai.
Termination of License & Lease
The termination of license and lease is a crucial procedure to undertake while closing down a JAFZA free zone company. Since the process takes time, it is mandatory that the businesses need to inform in advance before the liquidation process. A notice about deregistration should be given to the JAFZA 3 months prior to the warehouse facility and six months prior to the plot facility. For the cancellation of the license, the application needs to be submitted to the License & Lease section of the JAFZA. The following information should be considered while submitting the request for cancellation of the JAFZA free zone license:
- Submission of request letter to be signed by the License holder for license cancellation
- All the outstanding dues need to be settled
- License Termination fees must be paid
- A Fine of AED1,000 will be imposed per month in case the license has already expired
For the deregistering the lease of the JAFZA facilities, the business owners need to consider the following:
- Request letter to be signed by the License holder for lease termination with Lease Termination Form
2.. Handover the facility keys to the Lease & License section
- Approach the JAFZA Admin Section for Visa access
- The rent will be charged for the days taken for the maintenance of the vacated premises
Apply for VAT Deregistration with Federal Tax Authority
Companies that are already registered for VAT often forget to apply for VAT deregistration in time during the liquidation process. It is mandatory for the companies in the UAE (both mainland and free zones, including JAFZA) to apply for VAT deregistration to effectively complete the liquidation process.
The companies undergoing liquidation in JAFZA should apply for VAT deregistration with the Federal Tax authority (FTA). As per Article (14) of VAT Executive Regulations, application for deregistration must be sent to the FTA within 20 days of becoming eligible for VAT Deregistration. Companies that fail to apply for VAT deregistration within this stipulated time will have to pay a hefty fine of AED 10,000.
Maintaining Real Beneficiary Register
In a bid to comply with the UBO regulations, you need to hand over the Real Beneficiary Register and Partners, and Shareholders Register to the Registrar within (30) thirty days from the date of the liquidator’s appointment. Also, the liquidator or administrators of the company should maintain the Registers for a period of at least five years from the date of liquidation.
ESR Notification, Report Filing Before Liquidation
If your company under liquidation is found to be carrying out any of the nine Relevant Activities as per the ESR, you are bound to comply with the regulatory requirements such as filing of ESR notification and ESR Report. The Relevant Activities are Banking business, Insurance business, Fund management business, Finance and leasing business, Headquarters business, Shipping business, Holding business, Intellectual property business and Distribution and service centre business.
Furthermore, the company must meet the Economic Substance Test for any period during which it carries on a Relevant Activity and derives Relevant Income. Failing to comply with ESR requirements will attract hefty penalties, which will endanger your credibility as an investor and will derail the liquidation process. Consult with the best company liquidators in Dubai to ensure compliance with ESR during liquidation.
Cancellation of Visas
During the company liquidation process, the companies in JAFZA need to ensure that they have cancelled all the Visas and work permits of all the employees. The end of service benefits must be settled, and the bank guarantees of the employees must be recovered. However, the visa of a General Manager can be cancelled at the final step of the liquidation process.
Clearances from Customs, Service Providers
NOC must be obtained from Dubai Customs to prove that all the goods and products imported and/or exported by the company have been cleared, and all customs duties have been settled. Also, clearance must be secured from service providers such as DEWA, Etisalat and the RTA to ensure no outstanding dues or registered vehicles remain against or under the name of your company in JAFZA.
Liquidation Report & Clearance from JAFZA Finance Department
After obtaining all other clearances, the business owners should get clearance from JAFZA Finance Department. The company liquidator should file a liquidator report to the Finance Department, which will be reviewed and approved by the officials there. Since company liquidators in Dubai need to formulate and file the liquidation report, clearance from JAFZA Finance Department will be a time-consuming process.
Advertisement in Newspaper
After obtaining all the clearances, JAFZA will advertise the liquidation of your company in a local newspaper (Al-Bayan). There will be a lock-in period of 15 calendar days to ensure that no third parties make a claim towards the company’s proposed liquidation. After the lock-in period, the General Manager’s visa will be cancelled, signalling the completion of liquidation in JAFZA.
Liquidators in Dubai Can Help you Wind up a JAFZA Company
Company liquidation in JAFZA involves a series of carefully designed mandatory steps which demands a serious approach from business owners while winding up their companies. Having adequate knowledge about the cancellation of visas, UBO register, VAT deregistration, and ESR requirements will save you from incurring penalties. Hiring the best liquidators in Dubai, Such as Jitendra Business Consultants (JBC), is the easiest way to ensure compliance as entrepreneurs often tend to overlook vital aspects of the process.
JBC’s liquidation services in Dubai are designed to support the investors by reducing their compliance burden. JBC’s highly qualified auditors and consultants will handle every step with finesse. Business owners will be under pressure at the time of company liquidation in the UAE, and our approach is to minimize the stress. JBC helps you wind up your company in Dubai at affordable costs and maximum efficiency.