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What Are The Legal Remedies To Dissolve a Company If All The Partners Do Not Agree ?

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Staff Writer, TLR

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

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company incorporated United Arab Emirates UAE intends permanently

A company incorporated in the United Arab Emirates (UAE) that intends to permanently cease operations must do so, by following the processes outlined in the laws governing the formation and dissolution of companies.

Every company in the UAE must register with the appropriate government agencies and have a license to operate. Therefore, a company that intends to close, must notify the authorities of the same and the reasons for doing so, before the dissolution procedure begins, to avoid unwarranted fines and penalties upon the expired license. A different process may be followed, depending on the type of company.

 The process for closing a company entails several actions, including paying off debts, cancelling employment visas, paying off utility bills, and receiving approval from the appropriate government agencies. As a result, this article will go over the rules governing an LLC's dissolution as well as the procedures for obtaining an LLC's official dissolution as a legal entity.

 The provisions of the Companies Law state the law governing the creation of a company, different company kinds, obligations, prerequisites for setting up companies, liquidation, and termination of companies in the UAE.

 According to Article 302 of the Federal Decree-Law No. 32 of 2021, the general reasons for the Termination of Companies are - 

  1. The expiry of the term provided for in the Memorandum of Association or Statute of the Company, unless, such term is renewed in accordance with the rules provided in either of them;
  2. The termination of the object for which the Company was incorporated;
  3. The loss of all or most of the assets of the Company, in such a manner that renders the investment, or the remainder thereof not profitable;
  4. Merger in accordance with the provisions of this Decree-Law;
  5. Unanimous consent by the partners to end its term, unless the Memorandum of Association provides for a specific majority; or
  6. The issuance of a judgment to dissolve the Company.

 According to the aforementioned Article, a company shall be dissolved upon the occurrence of any of the following, without prejudice to the regulations controlling the expiration of each company; unless a particular majority is specified in the business's memorandum of association and a court order for dissolving the firm, the partners must unanimously agree to dissolve the company.

 The General Assembly must decide to dissolve and liquidate the company, name a liquidator, pay the debts and obligations, and distribute the remaining profits in the proportions known to each partner according to his share in the company before the quorum (typically partners who own 75% or more of the shares). The corporation maintains the legal personality required for the liquidation process during the liquidation period.

 As per Article 308 of the same law, partners may file a lawsuit if the quorum is not present and the majority of the company's shareholders did not vote and approve of the dissolution or liquidation: 

 (1) The directors must bring the issue of dissolution to the general meeting if a limited liability company suffers a loss equal to one and a half of the capital. A legal resolution for dissolution must be approved with the same majority needed to change the company's memorandum of association. 

 (2) Partners holding a quarter of the capital may ask for the dissolution of the partnership if the loss equals three-quarters of the capital.

 Where a partnership is at will, the company may be dissolved by a partner of the firm by sending out a notice in writing to all the other partners of his intention to dissolve the partnership firm. A note of dissolution once given cannot be withdrawn without the consent of all the other partners.

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