Overview: Business Closure in the UAE, and How it Must Be Pursued

Business Closure in the UAE, and How it Must Be Pursued

When you decide to close your business in the UAE, you must cancel your business license as well as any related permits.

Pretext

It is imperative that the relevant government bodies are aware that you are no longer in business in order to prevent any fines and penalties that may accrue if your license is not renewed when it expires.

Likewise, if you own a shareholding firm, it is critical to discharge your debts to creditors and partners while still safeguarding your interests and shares. Similarly, if you decide to start a firm again, it is also a good idea to keep your goodwill and business reputation in mind.

Getting to Grips with Cancellation Formalities

Depending on your company's structure, you may be able to cancel the license. The process is straightforward for enterprises and single proprietorships because all you have to do is file for cancellation through DED and obtain the necessary certifications from:

• Directorate of Residency and Foreigners Affairs.
• The Concerned Utilities Provider.
• The Organization Providing the Lease.
• Ministry of Human Resources and Emiratization.
• Bank Account Closure.

Process of Cancellation

In order to facilitate the cancellation process of companies except for civil companies, the following steps must be followed:  

First Stage -

• Prepare a notarized company resolution that conveys the organization’s collective intent to liquidate the company and cancel its license. The document must also carry the instruction to appoint the liquidator. 
• Arrange for a registered liquidator to provide a formal letter accepting the obligation.
• Apply for cancellation through DED or other permitted channels by completing the relevant paperwork.
• A liquidation certificate will be issued by the DED.
• Publicize the liquidation notice in two local newspapers.
• The debtors have 45 days from the date of issuance to file their claims, according to the notification.

Second Stage -

• Submit a letter to DED from the liquidator and the partners stating that no other parties have raised any objections within the grace period.
• To terminate a license, you must first get the necessary clearances from other government agencies.
• Proceed to the Ministry of Human Resources and Emiratization (MoHRE) to cancel the company card.
• Proceed to cancel the foreign partners' visas that the company previously sponsored at the relevant General Directorate of Residency and Foreigners Affairs.
• To obtain final cancellation permission, provide all of the above documentation.
• The fees will be set by the DED.
• Finally, upon fulfilling all the conditions and paying the required costs, you will obtain a certificate of deregistration (cancellation).

Private Liquidation and its Conditions

• The license must have expired two years earlier.
• The company must provide reliable evidence to necessitate a company dissolution.
• The UAE national must acknowledge his/her responsibility towards the organization.
• A document from the Ministry of Human Resources and Emiratization certifying the absence of sponsored personnel on the license is required.

Cancellation Process for a Sole Proprietorship

A no objection letter from the Ministry of Human Resources and Emiratization is required for sole proprietorships, as well as evidence of residency cancellation for non-Gulf citizens.

Types of Companies that would Require a Liquidator at Cancellation

The following are the types of companies that would ideally require a liquidator at the time of business closure or license cancellation.

• Simple Limited Partnership
• Public Joint Stock Company
• Private Joint Stock Company
• Simple Limited Partnership
• Public Joint Stock Company
• Private Joint Stock Company

Freezing v/s Cancelling Licenses

Companies in Dubai can pay a freezing fee to keep their trade licenses dormant for three years. They cannot, however, extend it beyond that time limit. A license that has been frozen is not the same as one that has been entirely terminated.

Applicable Conditions

The conditions to freeze a license are as follows:

• A letter from the corporation or institution requesting the temporary freezing of the concerned license.
• A letter from the Ministry of Human Resources and Emiratization (MoHRE) stating that the license does not have any sponsored persons on it
• A report issued by DED after it has completed its applicable inspection process.

Business Closure within a Free zone

In accordance with the free zone authorities' mandate, you must inform them in advance regarding possible cancellations. Likewise, an Arabic newspaper must be notified of the company's intent to close. Further, the same notification must be publicized in the Arabic newspaper.

Likewise, you will need the concerned permits from utility providers and other relevant government and free zone departments. Additionally, the company seeking closure must terminate your workers' visas and work permits, as well as close bank accounts after all of the documentation, has been processed.

More notably, there are three types of closures within free zones:

• Summary Wind Up: This type of closure can be done when a firm has no obligations or can discharge its liabilities within six months, and it starts with a statement of solvency.
• Creditor Wind Up – This type of closure can be done when the firm approves a resolution for winding up, which is then followed by a meeting with the creditors.
• Bankruptcy - Under UAE Commercial Transactions Law No. 18 of 1993, the court can declare a company to be bankrupt.

The closure of a business requires a lot more than simply stopping operations. In DMCC, you must submit an application for business closure using the service portal. As a result of the submission of the company termination application, the directors' authority, duties, and obligations will be ended.

Upon conveying the cancellation application, the matter will be closely reviewed.  Further, after processing, an announcement will be made in a local Arabic newspaper. At this point,  DMCC will subsequently submit the company's final termination and issue termination letters. Similarly, the authorities must be informed three months in advance for the office and warehouse facility and six months in advance for the plot facility in JAFZA.

Similarly, employers must provide their employees a two-month paid notice period before terminating their contracts, according to UAE labour law. Employees can often maintain their resident visas until the company's trade license expires. The corporation must then terminate utility and telephone services. Obtain a NOC from the utility provider before proceeding with the business closure.

Business Closure Within Ajman Free Zone

Company liquidation in the Ajman free zone is only possible following a personal application from a shareholder or a person with power of attorney from the company's owners. It takes roughly three weeks to complete the process. It is made up of the following key steps:

• Visa cancellation of any employees that were under the sponsorship of the said company. This process would take 7-10 days to fulfil.
• The cancellation of the establishment card would take 7-10 days to complete.

Similarly, when you file for company liquidation, you must return the business's original documentation to Ajman Free Zone Authority. They are as follows:

• Chamber of Commerce certificate
• Articles of Association
• Establishment Card
• License
• Lease Agreement

Likewise, before filing for company liquidation, you should liquidate any business bank accounts. This must be made evident through a confirmation from the bank in the form of a letter. At this point, you will receive an official deregistration notice from the free zone as a legal confirmation of the liquidation when the company is liquidated.

Conclusively, the procedure of cancelling or deactivating trade licenses in Dubai varies depending on the kind of business. When contrasted to the licensing of an LLC, deactivating a civil business or sole establishment license is comparatively simple (limited liability company). It is worth noting that the DED takes between 40 to 60 days to terminate a trading license (Dubai Economic Department).