The liquidation process is a complex and lengthy process. Doing it all by yourself can do more harm than good. Plus, it can cost you an arm and a leg because companies have to liaise with numerous external parties/authorities to have everything in place. Missing out on any step or document can result in unnecessary delay and complications. Adam Global offers liquidation services to help all UAE entities including LLCs, free zone companies and offshore establishments wind up their affairs in a quick and efficient manner. We guide you through the entire exit process from realising company assets to making distributions to creditors to winding up the affairs appropriately. The responsibilities of our liquidation specialists include but are not limited to: 

• Managing outstanding contracts
• Dishing out the necessary information to creditors throughout the process
• Having the name of the company struck off from the Trade Registry
• Interviewing company directors as part of its investigations

Usually, people use both the terms interchangeably but there is a fine line difference between the two. Dissolving a company means removing or “striking off” a company from the Trade Registry. The process takes place voluntarily in situations where the sole goal of setting up a company is achieved or we can say that the company is already in surplus and no longer wishes to continue. A director of the company simply can apply to the Registrar for the dissolution. On the other hand, liquidation refers to the extraction of assets to pay off any outstanding liabilities before that company is dissolved. It can be voluntary and forced. The process is managed by a liquidator and requires the input of the company’s creditors. The liquidation process varies depending on the three criteria 

• The type of ownership
• The type of liquidation
• The jurisdiction of registration, whether mainland Emirates or free trade zone.

When a company fail to repay money owed and to accomplish financial liabilities as and when they fall due, we draw the conclusion that it is already in the state of insolvency. Basically, when a company’s liabilities or debts start outweighing its assets, we say the company is on the verge of insolvency or bankruptcy. In a nutshell, a company’s failure to pay its debts timely is a dead giveaway that it is undergoing financial hardship and must cease to operate. If you’re in doubt about when to liquidate your company we can give you honest, confidential and practical advice. 

For any company in the United Arab Emirates (UAE), that intends to shut down its business permanently, it is pertinent to liquidate the company as per the procedures provided by the laws governing the establishment and dissolution of the companies. There are majorly two culprits that make the liquidation of a company in the UAE mandatory:

• The original objective behind the company establishment is accomplished and the entity is not required anymore;
• The entity is considered to be bankrupt.

The liquidation process should be duly completed failing which could lead you to confront serious consequences later if you have plans to get involved in other businesses or set up another company. Even if you don’t owe anything to your creditors, you still should formally liquidate a company rather before your trade licence expires. As there are numerous procedures to be followed on liquidation and avoiding or procrastinating these may cause various penalties and could also lead to the ‘blacklisting’ of your company (along with its directors and shareholders) by government authorities in the UAE.

There are three types of Liquidation:

• Creditors’ Voluntary Liquidation (CVL): This type of liquidation occurs when a company is unable to pay its debts declares itself insolvent. The company’s assets are sold and any surplus is distributed to its members.
• Members’ Voluntary Liquidation (MVL): Shareholders of a solvent company and the directors of an insolvent company may also voluntarily choose to end up the business operations and extract the assets to pay off any outstanding debts.
• Compulsory Liquidation: In case the creditors find out that the company in which they have invested their hard-earned money is incapable of paying them back they can force it to go into liquidation as a way of recovering the debt owed by knocking on the doors of the courts. When the courts’ decision is in favour of the creditors the company has to forcefully shut down its trading and liquidate its assets in order to repay the debts it owes to the claimants.

In terms of finance and economics, liquidation means shutting down the business completely and paying back the creditors and shareholders using the remaining assets, based on the priority of their claims. Once the liquidation process is over, a bankrupt business no more exists. General partners are liable to liquidation. It’s an option for insolvent companies. Liquidation can also point out the process of selling off inventory, usually at over-the-odds discounts.