Closing down a company in Dubai is a highly streamlined process that starts with a board resolution to appoint an official company liquidator. The process of company liquidation in Dubai involves important steps such as VAT deregistration, NOCs from various government departments, visa cancellation, transfer of trademarks, if any. However, new regulations aimed at economic transparency have increased compliance requirements even for the companies under liquidation. Companies that are closing down require to meet obligations related to Economic Substance Regulations (ESR) and Ultimate Beneficial Ownership (UBO), which necessitates the assistance of expert company liquidators in Dubai.
Since the liquidation process has now become more intricate, we provide you with valuable insights on dealing with ESR and UBO requirements while closing down the company. Read ahead to know the process and requirements you are bound to fulfil.
ESR Obligations of Companies under Liquidations
If your company is carrying out a Relevant Activity during liquidation in the UAE, you fall within the scope of ESR. The liquidators in Dubai who are appointed to oversee the winding process are required to ensure that your company continues to satisfy all its obligations under the ESR Regulations. The Relevant Activities are Banking, Insurance, Shipping, Investment Fund Management, Lease-Finance Business, Headquarters Business, Holding Company Business, Intellectual Property Business, Distribution & Service Centre Business.
Filing of ESR Notification to the Authority
If the entity is carrying out a Relevant Activity, the official liquidator should submit the ESR notification as well as ESR Report to the Regulatory Authority. The notification should contain information such as,
Relevant Activity being carried out by the entity during the Relevant Financial Year;
Information whether the firm generated Relevant Income during the Relevant Financial Year
The date of commencement and end of its Financial Year
Any other information or documents requested by the Regulatory Authority
Submission of Economic Substance Report
If the company under liquidation is not an exempted licensee, the liquidator should submit an Economic Substance Report in the form and manner approved by the National Assessing Authority. It should include details like type of Relevant Activity carried out, amount and type of income earned, amount and type of operating expenses and assets carried out, the location of the place of its business and, if applicable, plant, property or equipment used to carry out the Relevant Activity by it in the UAE.
Apart from that, the report should contain the number of full-time employees with their qualifications. The following details should also be included:
a) the Core Income-Generating Activity in relation to the Relevant Activity
b) Financial statements
c) declaration as to whether or not it satisfies the Economic Substance Test;
d) declaration whether or not it is a High-Risk IP Licensee
The Requirement to Meet the Economic Substance Test
If it’s not an exempted licensee, your company is obliged to meet the Economic Substance Test during the course of liquidation. The test is intended to demonstrate that your company had adequate economic substance in the UAE. The following criteria have to be met to meet the test:
(a) Carries out the necessary Core Income-Generating Activity in the UAE
(b) the Relevant Activity is directed and managed in the UAE
(c) It has an adequate number of qualified full-time employees who are physically present in the company
(d) Expenditure incurred by the company in the UAE
(e) there are adequate physical assets in the UAE
Ultimate Beneficial Ownership Obligations
A company under liquidation should notify the Regulatory Authority about its Ultimate Beneficial Owner (UBO). The real beneficiary or ultimate beneficiary is a person who owns or controls directly or indirectly 25 percent of the capital. Or a person who is entitled to voting rights for at least 25 percent of the shares, or who exercises ultimate control over a ‘legal person’. The legal person, administrator and the liquidator are required to maintain the Real Beneficiary Register and Partners or Shareholders registers for at least five years from the date of liquidation.
Consult with the Best Company Liquidators in Dubai, UAE
With ESR and UBO coming into the equation, the process of company liquidation in Dubai has become more elaborate. Now, you need to assess your ESR status and identify a real beneficiary before winding up the business in the UAE. It may seem tough but consulting with the top company liquidators in Dubai such as Jitendra Business Consultants (JBC) will ease the process. JBC’s business setup consultants and auditors strive towards making the process of closing down a company in Dubai less strenuous for the investors. JBC takes care of all the requirements such as visa cancellations, ESR filing, VAT Deregistration, maintenance of the Real Beneficiary Register etc.