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Company Closing in UAE

Closing Down your Company in the UAE – Things to Know

UAE is the business capital of the Middle East region. The business and trade establishments are constantly indulged in local and international business operations.

There will be instances where you would wish to close down your current company in the UAE and start a new business or change the business jurisdiction from the Free Zones to the Mainland etc.

Having the right know-how of the company closing procedures in the UAE will come handy in such cases.

Company Closing Process in the UAE

Closing down the business in the UAE could also be for good and returning to your homeland or relocating to another country.

Whatever be the reason, there are few must-haves to be followed while the closing down of business in the UAE.

To ensure a smooth exit for you and an entry in the future without any hassle, the company closing process has to be conducted as per the guidelines of the UAE business laws.

Firstly, you must cancel the business license and all related permits associated with it.

It is important to inform the relevant government entities about the business closure and cancellation of your business license. It will help in avoiding any accumulated fines and penalties on your business license.

The business license will incur a fine if not renewed upon expiry. Hence, it must be made sure you cancel your license legally.

Also based on the shareholders, ownership types, business jurisdiction the rules and requirements for company closing vary.

Closing Business on the Mainland

For establishments and sole propertied ships, the process is relatively simple. Apply for the cancellation through Department of Economic Development and acquire all the relevant clearances from:

  • Ministry of Human Resources and Emiratisation
  • Directorate of Residency and Foreign Affairs
  • Relevant Water and Electricity authority
  • Leasing entity

For companies with shares, the process is longer as it requires to liquidate the shares, collect debts and pay the creditors before getting the DED approval for closing.

If your company falls under the below legal form of business. You will have to appoint a liquidator for initiating the closing down of the company.

  • General Partnership
  • Limited Liability Company
  • Simple Limited Partnership
  • Public Joint Stock Company
  • Private Joint Stock Company

What are the Steps to Dissolve Mainland Companies?

The closing of the company in the UAE takes place in two stages:

Stage 1:

  • Notarized minutes of the shareholder meeting confirming the company liquidation and the appointment of a liquidator
  • Arrange an official letter by a registered liquidator accepting the duty
  • Apply for the company cancellation by filling the required form through DED or other approved channels
  • Receive the liquidation certificate after the submission
  • Publish the notice of liquidation in two local newspapers
  • There are 45 days from the date of issue for the debtors to submit their claims

Stage 2

  • Submit to the DED the declaration letter from the liquidator and the partners indicating no objection from any other parties during the grace period
  • Collect required approvals of other government entities to cancel a license
  • Cancel the firm card from the Ministry of Human Resource and Emiratisation
  • Cancel the foreign partner’s visa sponsored by the company at the respective General Directorate of Residency & Foreign Affairs
  • Submit all the above documents to get the approval for the final cancellation
  • Pay the cancellation fees and receive the certificate of deregistration after paying the required fees

Closing a Business in a Freezone

As per DMCC, there are three types of closures for Freezone companies.

Summary Winding Up – When the companies have no liabilities or are able to discharge its liabilities within 6 months and can process a statement of solvency

Creditors Winding Up- When the company passes a resolution for winding up and is followed

Bankruptcy –It can be done by the court under UAE Commercial Transactions law no.18 of 1993.

In Freezones such as DMCC, the company closure has to be executed through the member portal.

 The responsibility and authority of the Directors will cease as an effect of submitting the company closing application.

The application will be reviewed and processed. It will be followed by publishing in a local Arabic newspaper.

DMCC will be filing the final termination of the company and issue the termination letter.

What are the Three Major Penalties on an Expired Business License in Dubai?

Be it businesses in the mainland, free zone or offshore in the UAE, the business license has to be renewed on a yearly basis.

The business license is the official and legal documentation that proves the existence of the business entity in the UAE.

To conduct business operations in the UAE, the business has to always provide the trade license copy and number for checking its authenticity.

Let’s look at what are the penalties incurred because of non-renewal of a business license

1. Monetary Penalties

In the mainland, the DED has certain fines for businesses defaulting their license renewal. There are various ways businesses defer their trade license renewals like:

  • Business operations without the license
  • Business without a renewed trade license
  • Business with the additional office for an existing license without permissions

The penalty fees vary across the mainland and free zones. You can check the DED website or the respective free zone website for the penalty for defaulting license renewal.

2. Company Black Listing

Blacklisting of the company is initiated at the event of non-renewal of trade license. Once the company is blacklisted they are not allowed to carry out any business or transactions.

The bank accounts will come to a freeze. The company has to submit all the required documents to the government authorities for review to get them cleared off the blacklist.

3. Restrict the Expansion of Business

The non-renewal of business licenses will result in a stop in the future expansions of the businesses.

Also, even at the event of liquidation, the default in the trade license renewal will come into the way during obtaining the clearance and issuing the final license cancellation certificate.

Hence small and large businesses have to keep a track of their trade license renewals to avoid any penalty, blacklisting or spoil reputation.

Aurion Business Consultants will handhold you throughout the company closing processes so that you can have a hassle-free closing process.

Also, our expert consultants are always ready to assist you anytime for all your business support requirements.

Contact: Aurion Business Consultants