Page 42 - Focus Group

LIQUIDATION

Simple yet Tricky

The UAE is having world class infrastructure years by paying a certain freezing fee. In this case,
facilities along with friendly business environment the Company will not be allowed to maintain visas
and progressive policy which position the UAE at an and bank account.
edge over other countries. However, in-spite of such 2. Government Formalities
opportunities, some Companies faces issues like
financial planning, decision making or compliance Each licensing issuing authority is having its own
issues. Due to these issues, the Company liquidation requirements and procedure. In JAFZA, authorities
or winding-up process might kick start. The must be notified three months prior for the office
Companies must cancel the business license and all or warehouse facility and six months in case of plot
associated permits to avoid any fines or penalties, facility. As per the UAE’s Labour Law, employers are
when it is not renewed upon expiry date. required to give their employees a two-month, paid
notice period before terminating their contracts.
In this article, I will share some of the practical
points which should be taken into consideration As per the Federal Law No. 2 of
during the liquidation process: 2015 on Commercial Companies, if
the Company is under liquidation,
1. Decision for Liquidation the papers of the company shall be
The foremost challenging part is deciding whether marked accordingly. It means every
to close down the Company or not? Since the invoice, order for goods or business
closure also involves cost. Just because of a loss or letter issued on in which the name of
increased compliances, we have seen that decision the Company appears, shall contain a
to close is taken, without taking into consideration statement that the Company is being
the long-term horizon when the market picks- wound up. Additionally, the Company
up. Moreover, businesses may consider freezing can’t take any new business other
a trade license or a Voluntary Suspension, which than as required to complete previous
is different than liquidation. In Dubai, Companies works.
may keep their trade licenses inactive for three

42 TAX JOURNAL 2020 The Institute of Chartered Accountants of India (Dubai) Chapter NPIO