UAE Federal Law No. (2) of 2015 on Commercial Companies covers the topic of company liquidation and asset division.

The provisions of this Law must apply to the liquidation of the company, unless the firm’s memorandum of association or articles of association specify the method of liquidation or the partners agree to a different way of dissolution.

One or more liquidators must be appointed by the partners or by a decision of the General Assembly or another similar body in order for the liquidation to be carried out, provided that the liquidator is not currently the company’s auditor or has audited its accounts within the five years prior to appointment.

If liquidation is made under a judgment, the competent Court shall point out the method of liquidation and appoint the liquidator. In all events, the task of the liquidator shall not be terminated by the death, declaration of bankruptcy, insolvency or interdiction ordered against the partners, even if the liquidator is appointed by the partners.

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Types of liquidation of the company

Free Will Liquidations

An insolvent company’s directors may decide to halt trade and sell its assets in order to pay its creditors, or its shareholders may decide to dissolve a firm that is solvent

Compulsory Liquidations

If a business’s obligations are not paid on time, its creditors may ask the courts to liquidate the business so they may get reimbursed. A firm may be ordered by the courts to liquidate and sell its assets in order to settle debt.

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Steps followed by UAE law in Liquidation of the Company

Article (310) – The Decision appointing the Liquidator

The liquidator shall enter the Decision appointing him and the agreement of the partners or the Decision issued by the General Assembly concerning the method of liquidation or the judgment issued for such purpose in the Commercial Register. The appointment of the liquidator or the method of liquidation shall not be effective against third parties other than from the date of entry thereof in the Commercial Register. The liquidator shall charge such fee as determined in the document appointing him, failing which the Competent Court shall determine such fee.

Article (312) – Inventory of the Assets and Liabilities of the Company

The liquidator shall, immediately upon his appointment, shall prepare an inventory of all the assets and liabilities of the company. The managers or the Chairman shall provide to the liquidator the books, documents and assets of the company.

Article (313) – Preparation of a List of the Assets and Liabilities of the Company

The liquidator shall issue a detailed list of the assets and liabilities of the company and its balance sheet to be signed by the managers of the company or its Chairman. The liquidator shall keep a book to enter the liquidation procedures.

Article (314) – Duties of the Liquidator

The liquidator shall do everything required to maintain the assets and rights of the company and collect the debts of the company from third parties and shall deposit the amounts collected in a bank for the account of the company under liquidation immediately upon such collection.

However, the liquidator may not demand the partners to pay the balance value of their shares other than as required for the liquidation process and provided that the partners are treated equally.

Article (315) – The Liquidator as a Representative of the Company

The liquidator shall do all acts required for the liquidation and in particular to represent the company before the Courts, to pay the company’s debts, to sell the movables and real estates of the company at a public auction or by any other way, unless the document appointing the liquidator provides for a specific way for the sale. However, the liquidator may not sell the assets of the company all at once without permission from the partners or the General Assembly of the company.

Article (316) – Notification of the Creditors of the Liquidation

All the debts payable by the company shall become immediately outstanding upon its dissolution. The liquidator shall notify all the creditors by registered letters with acknowledgment of receipt of the commencement of the liquidation, inviting the creditors to present their claims. The notice shall be published in two local daily newspapers; one of them is issued in Arabic. In all events, the notice of liquidation shall include a period granted to the creditors for at least 45 days from the date of the notice to present their claims.

Article (320) – Term of Liquidation

The liquidator shall complete his task within the period as determined in the document appointing him. If no such period is determined, any partner may refer the issue to the Competent Court to determine the term of liquidation.

Such period may not be extended other than under a Decision by the partners or under a special Decision by the General Assembly, as the case may be, upon inspection of the liquidator’s report stating the reasons for not completing the liquidation in due time. If the term of liquidation is determined by the Competent Court, it may not be extended without the consent of the Court.

Article (321) – Interim Account of the Liquidation Procedures:

The liquidator shall provide to all the partners or the General Assembly every three months an interim account of the liquidation procedures. The liquidator shall state any information and statements as required by the partners on the status of liquidation. Within one week from the date of the approval by the General Assembly, the liquidator shall notify the partners to receive their dues within no later than 21 days under an announcement to be published in two daily local newspapers, one of them issued in Arabic.

FAQ about liquidation of the company in the UAE

1-What happens when you put your company into liquidation?

When a business enters a liquidation process, its property and shares are “liquidated,” or converted into cash, and distributed to the creditors of the business in accordance with their order of precedence. Your company ceases to exist as a result, and Companies House removes it off the registry.

2-How long does it take for a company in liquidation to be dissolved?

Business liquidation is not subject to a time constraint under the law. The entire process of liquidating a firm often takes between six and 24 months. Of course, it depends on the state of your business and the type of liquidation you’re conducting.

3-What happens to a director of a company in liquidation?

Any money made from the company’s assets as it enters the final phases of liquidation will be given to the creditors of the company. Due to the company’s insolvency, directors will not get any proceeds from the corporation in their capacity as shareholders.

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