Liquidation of a company is a process to close the company, sell its assets and pay out all its liabilities. It normally occurs when the company have no money to its debts, staff salaries, office rent etc. When company end its business, normally the organization assets are sold out and the proceeds will be used to settle its legal expenses, staff salaries, creditors and the balance will be distributed to its shareholders.
A person is being appointed as a liquidator, who conducts the process of liquidation. A Liquidator is appointed by the Court or the shareholder of the company according to the type of liquidation.
Role of a Liquidator
A liquidator is the chief decision maker in a liquidation process. The duties of a liquidator are as below:
1. Initiating the Winding-Up Process
Once the Board of Directors/Shareholders pass a resolution for the liquidation or winding up, and the appointment of liquidator, the liquidator, upon the receipt of such resolution, issues an acceptance letter.
2. Publishing the Liquidation Notice
Once the liquidation process is initiated, the liquidator publishes the liquidation notice, both in Arabic and English, in 2 local newspapers.
3. Overview of Collection & Distribution of Company Assets
If needed, the liquidator may overview the collection and distribution of company assets, and the settlement of liabilities.
4. Preparing the Statement of Affairs
As the last step in the liquidation process, the liquidator prepares the statement of affairs and the liquidator’s report.
Liquidation Process in Dubai
- Passing of Resolution by the Shareholders
- Appointment of Liquidator
- Advertisement in 2 News Papers
- Payment of Legal Expenses
- Payment to Employees and Cancellation of their visas
- Closing of Bank Accounts
- NOC from Concerned authorities
- De-registration from FTA
- Cancellation of Partners Visas
- Issuance of Liquidator Report
- Cancellation of Trade License
Types of Liquidation
Company liquidation may be of the following two types:
1. Voluntary Liquidation
In case of voluntary liquidation, the shareholders of a company will decide to wind up the company as they have no money to pay for creditors. In this type of liquidation, priority is given to the creditors.
2. Compulsory Liquidation
Compulsory liquidation is a type of company liquidation which is put forward by court order. Here, the assets of the company are distributed to the creditors and contributors based on the priority of claims.