In the UAE, liquidation, winding up, and dissolution are used as synonyms because it’s just about one and the same process when you hear one word or another. Depending on the form of firm, liquidation can be carried out in compliance with either the Commercial Companies Legislation applicable to mainland companies, the Free Zone Laws applicable to free zone companies or the Offshore Companies Regulations applicable to offshore companies. There are several common laws and requirements for the conduct of trials since there are several emirates and registry authorities in the UAE. In this blogpost, we will address the key factors for the liquidation of any enterprise in Dubai.
Key Reasons Behind Company Liquidation in Dubai
Dubai has become a platform full of development prospects. These prospects inspire new businesses and corporations to make investments in the Dubai industry. Even if there is a simple protocol for doing so, though, on their road to growth, there are still several organizations that face some challenges. Such concerns may be legal or linked to financial issues. Because of these questions, the company’s liquidation process is taking effect. The company’s liquidation phase will rely on the company’s actual financial position.
Let’s discuss some of these reasons in detail:
Choosing the Wrong Location
The company’s performance is very contingent on its location. With almost all forms of industry, not every environment is safe. In order to avoid possible complications that can occur in the future, it is necessary to select a venue with great care. Due to the choice of the wrong venue, the business could liquidate.
Inadequate Financial Abilities of The Business Owner
The company’s owner is the one on whom the whole business process rests. There is less chance of success and more likelihood of failure if the business owner does not have the requisite and sufficient financial experience. In terms of the central structure in which the business can function, financial considerations are one of the most important. Bad financial expertise may suggest that the needed ability is not handled by you, which will result in negative performance.
Absence of Efficient Planning
At each stage of the organization, planning is essential. There is a risk that the findings would not be as predicted if items are not efficiently prepared. A significant explanation for the liquidation of the company is the lack of proper planning. If tasks are not planned effectively, they do not contribute to the performance of the organization as a whole.
Lack of Sufficient Financial Resources
Running a business also requires an expense that is much higher than the amount planned. If a business owner needs to succeed in the market, in order to continue moving, they need to provide the requisite resources. Transferring credit lines that lack full control of the customer will not be a safe option. Due to the existence of these issues, the company’s owners may decide to liquidate the firm.
Shortage of Skilled Work Force
There should be three main attributes to the owner of a company, i.e. managerial, professional and entrepreneurial. It would not be good for business to overlook any of these characteristics. Sometimes, there is a slim probability that all these important qualities occur within a single entity. That’s why every business owner needs a powerful and professional team that can fulfil all the assignments mentioned. The failure of this team could contribute to the organization being liquidated in Dubai.
There are several other factors behind the liquidation of a corporation, other than the reasons listed above:
- Expiry of license or duration mentioned in the articles of incorporation or association
- Completion of the objective for which the company was established
- Approval of the shareholders that the company’s term of existence be brought to an end as per the stipulated majority
- A company becomes insolvent and is not in a position to clear off its debts.
- A company has no purpose in going forward.
- Sometimes a company may require reorganization or restructure and it becomes more appropriate for them to wind up.
- A company owner wants to stop the consistent stress from the creditors seeking payment.
- A company owner suddenly decides to cease the company operations.
- A company goes through certain legal problems because of law-related issues.
We Are Here for You
If the procedure of liquidation of a firm in Dubai has begun, the company is removed from the Trade Registry, the corporate license is withdrawn, and the foreign investors’ visa is cancelled. Other than that, the company’s breakup is publicly declared in a document signed by the liable liquidator.
This can be a tiresome operation, so please feel free to contact our Dubai consultants for in-depth information about how businesses in Dubai are liquidated and the legal terminology used in this sort of practice. We can support you in the process of shutting down your company at Riz & Mona Consultancy. Our staff has technical guidelines that will assist you through license cancellation in Dubai to mitigate your legal obligations and potential financial losses. We communicate with the agencies concerned and oversee all the procedures involved to ensure the liquidation phase is conducted seamlessly and hassle-free.