Voluntary Company Liquidation in UAE

It is not easy close a business in the UAE because it requires detailed documents and a lot of legal processes, but it is important to shut down properly because it saves you from future problems. Voluntary liquidation means that the owners take the decision to close the company. There are many reasons to close the company like the business is not making enough money, the goals related to the business are done, or the owners just want to close it. In this article, we will explain the process of company liquidation so you can correctly close your company.

What is Voluntary Company Liquidation?

Voluntary liquidation actually means that the owners or shareholders of a company have decided to close it down on their own due to any reason. This process starts when the company still has enough money to pay all of its debts, so that it does not face any difficulty in future.

The main goals of voluntary liquidation are:

  • Paying off all debts as well as outstanding bills
  • Sharing any leftover money or assets with the owners
  • Making sure all legal and tax steps are followed properly

Types of Voluntary Liquidation in the UAE

There are two main types of voluntary liquidation in the UAE:

1 – Members’ Voluntary Liquidation (MVL)

This happens when the company is in good financial condition and can pay all its debts. The owners and directors decide to close the business even though it is not in trouble. The main aim is to close the company correctly and make sure all the bills are accurately paid and the remaining assets are distributed among the owners accurately according to their share.

2 – Creditors’ Voluntary Liquidation (CVL)

When a business is unable to pay its debts, CVL is used. The directors may start the process, but it mainly happens because the company is under financial pressure. In CVL, the aim is to sell off assets and pay creditors as much as possible, based on what the company still owns.

Main Stages of Voluntary Company Closure in the UAE

Here’s a simplified breakdown of the voluntary company liquidation process:

1 – Board or Shareholder Resolution

The process begins with the owners or board members officially agreeing to close the company. This decision must be written, signed, and submitted to the proper licensing authority.

2 – Appointment of a Licensed Liquidator

A liquidator is a licensed person or a person chosen by the company to handle the closing of the business. They take care of selling assets, paying off debts, and preparing the final reports.

3 – Notification to Authorities

An official notice must be given to the licensing authority, such as the Department of Economic Development or the Free Zone authority. This includes the decision to close the company and the letter confirming who the liquidator is.

4 – Announcing the Company’s Closure in Newspapers

You must post a notice about closing the company in two local newspapers, one in Arabic and one in English. The reason for this step is that everyone gets to know about the company’s liquidation. This notice stays active for 45 days, giving anyone who is owed money time to come forward with a claim.

5 – Clearances and Settlements

Before liquidation can be completed, the company must obtain clearance letters from:

  • Utilities (DEWA/SEWA/FEWA, etc.)
  • Banks
  • Telecommunication providers
  • Labour and Immigration departments
  • Lease or landlord
  • VAT and tax authorities (if applicable)

All employee dues, visas, and end-of-service benefits must also be settled and cancelled.

6 – Final Liquidation Report

Once all financial obligations are met and no objections are raised, the liquidator submits a final liquidation report to the authority.

7 – License Cancellation

Finally, the business license is officially cancelled, and a liquidation certificate is issued, confirming the company is legally closed.

Key Takeaways

Voluntary company liquidation in the UAE is a responsible as well as legal way to close a business that is no longer operating or serving its original purpose. If you take a wise decision, the process can be very smooth and tension-free. If you are looking for a company that can help with company liquidation in Dubai, Abu Dhabi, Sharjah, and other Emirates of the UAE, then you are in the right place because Vertix has the best team to make your process flawless.

Also Read: Compulsory Company Liquidation