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Closure of Business in the UAE

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Staff Writer, TLR

Published on July 14, 2023, 17:41:00

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While the commencement procedure of a business is vital for it to run smoothly, it is equally important to understand the process for the closure of a business. The process, if not managed well, may attract fines and administrative penalties.

Why is it important?
Company closure is given high importance in the UAE to avoid unnecessary issues that may arise in the future. Since a business license is issued to conduct business, it needs to be renewed before its expiry.
However, cancelling a license will let the concerned authorities know that the business no longer exists. It saves the person from the imposed fines that arise if the license is not renewed as per the regulations. 
Furthermore, If the closure process is dealt with negligently or partially, it may create problems in the future while re-registration of the company or opening a bank account.

Steps to follow:
Before initiating the process of liquidation, it is essential to collect all the documents mentioned below:
• Business license copy
• Memorandum of Association
• Power of Attorney (if any)
• Shareholders Resolution
• Shareholders Passport Copy
• Copy of Emirates ID 
• De-registration Application Form 

After collecting all the above-mentioned documents, an individual needs to identify the company's location where it is registered and the type of company. Since the procedure of closure may vary for different kinds of companies:


A. Location of registration

 Companies located in UAE Mainland
i. Stage 1
First, confirm the company liquidation, appoint a liquidator, and then prepare notarized minutes of the general assembly.

Secondly, Arrange an official letter by a registered liquidator accepting the duty and file the form required to apply for cancellation. It can be done through the Department of Economic Development (DED) or other approved channels.

Thirdly, after receiving the liquidation request, DED will issue a certificate of liquidation, and it is mandatory to publish the notice in two local newspapers. It provides the debtors a period of 45 days to submit their claims for approval.
ii. Stage 2
Fourthly, submit a declaration letter from the liquidator and a no objection letter from the partners to the DED.

Fifth step includes collecting the approval of other concerned government bodies required to cancel the license and cancel the “establishment card” issued by the Ministry of Human Resources and Emiratisation (MOHRE). If the company sponsors a foreign partner’s visa, get it cancelled at the respective General Directorate of Residency & Foreigners Affairs (GDRFA) office.

At last, submit the above documents to the authorities and collect the cancellation certificate. After that, DED will notify you about the fees for the cancellation process, and after the payment of the fees, a certificate of de-registration will be issued.

 Companies located in Free zones
The procedure for closing a corporation in a free zone varies and is determined by the relevant free zone authorities where the company is registered.
Appointing a company liquidator is not required to commence the company closing procedure. The company can directly approach the Free Zone Authority or other business advisors to finish the process correctly.


B. Type of Company

 Sole proprietorship company
i. Fill in the license and registration cancellation form
ii. Submit a copy of the trade license
iii.Cancel the “establishment card” issued by the Ministry of Human Resources and Emiratisation (MOHRE)
iv. Collect the no objection letter from MOHRE and residence cancellation proof in case of non-gulf national.
v. Submit the above documents to the authorities and collect the cancellation certificate.


 Civil works company
i. Fill in the license and registration cancellation form 
ii. Cancel the “establishment card” issued by the Ministry of Human Resources and Emiratisation (MOHRE)
iii. If a foreign partner’s visa is sponsored by the company, then get it cancelled at the respective General Directorate of Residency & Foreigners Affairs (GDRFA) office.
iv. Collect the approval of other concerned government bodies required to cancel the license
v. Prepare a cancellation contract of partnership and get it authenticated by the notary public in UAE.
vi.Submit the above documents to the authorities and collect the cancellation certificate.


 Non-civil companies

Non-civil companies share the same procedure with the companies located in the mainland of UAE. 

Conclusion
Many companies registered in the UAE are facing substantial fines as a result of failing to initiate the company closure procedure in accordance with UAE legal procedure.
Companies that do not follow the proper closing processes risk being debarred and facing difficulties when applying for a new business license in the future.
Since the closure of a company is a well-structured operation, and if a person feels that they are not equipped with the essential skills to follow the closure procedure. In that case, it is best to carry out the closure in collaboration with an experienced Business Consultant.

By Vansh Tayal

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