Business owners running a company in Dubai Airport Free Zone (DAFZA) can opt for liquidation if they find going ahead tough. A company may wind up in Dubai under various circumstances including loss, expiry of the company’s term, achieving the business objective, debt, or partners agree to exit. Whatever be the season, you can opt for company liquidation in Dubai to legally exit the operations.
The processor of company liquidation in Dubai has become more intricate since new compliance requirements such as Ultimate Beneficial Ownership (UBO) and Economic Substance Regulations (ESR) have come into effect. Ignoring to meet ESR and UBO requirements will lead to hefty penalties and prolong the process of company liquidation in DAFZA. Hiring reputed company liquidators in Dubai can help you resolve such compliance issues.
In this article, we discuss how you can wind up a company in DAFZA while navigating ESR and UBO requirements. Read ahead.
1. Board Resolution to Appoint Liquidator
The shareholder or board members must pass a resolution to liquidate the company operating in DAFZA. They should also appoint an official liquidator through the resolution. The liquidator can be an audit firm licensed to carry out the process of company liquidation in Dubai or UAE. The resolution should be notarized by the Notary Public and submitted to the free zone authority. The liquidator should confirm his appointment by submitting an acceptance letter to the free zone authority.
2. Application for Liquidation
Along with the resolution, you should submit a duly filled application to liquidity your company. The application should be accompanied by relevant documents. In case of insufficient documents, DAFZA will ask you to submit more information. If everything is alright, DAFZA will give you the green signal to initiate the process of company liquidation in Dubai.
3. Apply for VAT De-registration
VAT De-registration is a vital obligation that most companies forget to meet while undertaking company liquidation in Dubai. If your company has an active VAT registration, you must apply for de-registration immediately after deciding to wind up the company. As per UAE VAT law, you must apply for de-registration within 20 days of becoming eligible. Failing to apply within the stipulated timeframe will lead to a hefty penalty of AED 10,000 from the Federal Tax Authority (FTA).
4. Handover Ultimate Beneficial Ownership Registers
Unlike in the older times, companies operating in the UAE are now required to meet Ultimate Beneficial Ownership (UBO) obligations while undergoing the liquidation process. As per Cabinet Decision No. (58) of 2020, a company must hand over the Real Beneficiary Register and Partners or Shareholders Register to the authority within 30 days of appointing the liquidator. Moreover, the liquidator or company administrators should maintain the registers for at least five years from the date of liquidation of the company. Companies undergoing liquidation in DAFZA will incur hefty penalties if these requirements are not met.
5. Comply with Economic Substance Regulations
Companies that have conducted any of the nine Relevant Activities must meet their reporting obligations under ESR while undergoing liquidation. Such companies must meet requirements such as ESR notification filing, ESR report submission and meet the Economic Substance Test for any period during which it carries on a Relevant Activity and derives Relevant Income.
The Relevant Activities under ESR are Banking business, Insurance business, Lease Finance business, Investment Fund Management business, Holding Company business, Headquarters business, Shipping business, Intellectual Property business and Distribution & Service Centre business. Violation of this requirement will attract hefty penalties along with reputation damage.
6. Carry out Branch De-registration
Companies undergoing liquidation in DAFZA must close down their branches or subsidiaries if they have any. It will be hard for you to wind up a branch once the parent company is liquidated. A board resolution is needed to shut down the branches but the powers of the board dissolve once the parent company appoints a liquidator.
7. Clearance Letter from Service Providers & Customs
The company should secure a clearance or no due letter from the Dubai Customs, and utility service providers to complete the process of liquidation in DAFZA. Clearance should be obtained from Etisalat, DEWA, and RTA (if any vehicle is registered under the company’s name).
8. Cancellation of Visas, Bank Account
You must cancel visas of all the employees, ID cards, immigration cards to expedite the process of company liquidation in DAFZA. You must close the company’s bank accounts and obtain a closure letter from the bank. Experienced company liquidators in Dubai can smoothly handle such processes on your behalf.
9. Notification of Liquidation
The liquidator should advertise the news of the liquidation in a local newspaper. Following the publication, there will be a 45-days lock-in period. During this period, any creditors or clients can come up with claims over the company.
10. Submission of Liquidation Report
At the final stage of the company liquidation in Dubai, the official liquidator is required to submit the liquidation report to the free zone authority. If the report contains the financial statement from the last Financial Year, the signature of the shareholder of the director of the company should be put on the Financial Statement. The authority will then remove the name of the company from its register.
Hire the Best Company Liquidators in Dubai, UAE
Opting for company liquidation in Dubai is the best exit strategy to discontinue your operations in a legally accepted way. Company liquidation in DAFZA helps all your stakeholders including employees, creditors and clients to have an amicable settlement. However, the evolving regulatory landscape in the UAE has increased the compliance requirement for companies. Since ESR, VAT and UBO have become an important part of the liquidation, hiring the best company liquidators in Dubai such as Jitendra Business Consultants (JBC) has become inevitable.
JBC has the right resources and sufficient experience in helping the companies conclude liquidation by meeting all the legal requirements. Since JBC offers ESR, VAT and UBO compliance services, it will be easier for us to help you out during liquidation. JBC’s company liquidation services in Dubai will help you exit the operations without any complexities.