Understanding Voluntary liquidation in UAE

 4th November 2019  Liquidation

Voluntary liquidation is a self-imposed wind up of a company that has been approved by

shareholders. Such a decision will happen once a company’s owner decides that the company has
no reason to continue operating. It is not a court order (not compulsory). The aim of a voluntary
liquidation is to conclude the company’s operations, wind up its nancial a airs, and dismantle its
corporate structure in a formal manner while paying back the creditors according to their assigned
priority.

What causes a company to go into liquidation?

Poor functioning of business: when a company does not operate properly the shareholders
may decide to voluntary wind up the company.
Restructuring and transferring assets to another company: this may be in exchange for an
ownership or equity stake in the acquiring company.
Limited period: Voluntary liquidations may also be approved because the liquidating company
was only meant to exist for a limited amount of time or for a speci c purpose that has been
ful lled.
The exit of key member: In addition, voluntary liquidation may happen if a key member of an
organization leaves the company and the shareholders decide not to continue operations.

Find more info: Liquidation Process for A Company with No Assets

Process of voluntary liquidation in UAE
1. Determine the type of liquidation

Members voluntary liquidation

A Members Voluntary liquidation is a process that enables shareholders to appoint a Liquidator in

order to formally close down a solvent company. A can only take place if the directors of the
company make a formal declaration for voluntary liquidation.

Creditors voluntary liquidation

If the company turns to be insolvent the liquidator will call a meeting of creditors and the
liquidation becomes creditors voluntary liquidation. A Creditors’ Voluntary Liquidation is the
liquidation of a company that cannot pay its debts as they fall due. The process is initiated by the
directors of a company where the company’s liabilities exceed its assets and is insolvent. When the
company directors realize the company does not have a reasonable prospect of survival, they are
obliged by the Company’s Act to put the company into liquidation. The company can nominate an
authorized person as a liquidator. It must call a meeting of creditors to discuss the nancial details
of the company.

2. Directors of the company to agree for voluntary liquidation

Next step is the directors of the Company need to agree that the Company is suitable for a
liquidation.

3. Declaration of solvency

The directors have to le the declaration of solvency with the registrar.

4. Special resolution

Directors have declared the company solvent, so the managing shareholder of the Company will
pass a Special Resolution for liquidation.

5. Liquidators consent

The Liquidator will sign a consent form (to be led with the Registrar of Companies) notifying the
Registrar of the appointment.

6.  Settlement of claims

Any invoices and claims submitted to a Liquidator will be reviewed for authenticity. The liquidator
will work with the Company’s various service providers to determine whether the submitted claim
is genuine.
 7. Final meeting:

The liquidator will conduct a nal meeting and present all necessary documents and con rmation
for liquidation.

Find Out Reasons behind the liquidation of companies in Dubai

Director’s duties in Voluntary Liquidation

In the voluntary declaration the company’s directors must provide:

The information about companies’ a airs to the liquidator and attend interviews with the
liquidator as and when required.
Look after and hand over the company assets with all records, bank statement and other
important papers relating to assets and liabilities

Company liquidation services 

Farahat and co have a team of leading company liquidators in the country. We can guide you
through all the steps of voluntary liquidation. Our specialized team deeply investigates each case
and executes the voluntary Liquidation process smoothly. For further consultation, contact us

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