Closing (Dissolution) a Limited Liability Company in the UAE

The dissolution of a Limited Liability Company (LLC) in the UAE involves a structured legal process governed by the UAE Commercial Companies Law (Federal Decree-Law No. 32 of 2021) and other relevant regulations. Below is a comprehensive guide:

  1. Overview of LLC Dissolution in the UAE

Dissolution is the formal closure of an LLC, ensuring that the company ceases operations and fulfills all legal, financial, and regulatory obligations.

  1. Types of Dissolution
  2. Voluntary Dissolution
  • By Shareholders’ Decision: Initiated when shareholders agree to wind up the company, often due to the completion of its purpose or business strategy changes.
  1. Involuntary Dissolution
  • By Court Order: Occurs when the company fails to meet its obligations, engages in illegal activities, or becomes insolvent.
  1. Key Steps in LLC Dissolution

Step 1: Shareholder Resolution

  • A shareholders’ resolution must be passed in a general meeting to approve the dissolution.
  • The resolution must be notarized and specify the reason for the dissolution.

Step 2: Appointment of Liquidator

  • The shareholders must appoint a licensed liquidator to manage the winding-up process.
  • A liquidator’s appointment letter must be notarized.

Step 3: Notice of Liquidation

  • Publish a notice of liquidation in two local newspapers (one in Arabic) for 45 days, inviting any claims against the company.

Step 4: Clearance of Obligations

  • Settle Debts: Pay off creditors and resolve outstanding liabilities.
  • Cancel Licenses: Deregister trade licenses with the relevant authority (e.g., DED or free zone authority).
  • Employee Settlements: Terminate employment contracts and settle end-of-service benefits.
  • Tax Clearance: Obtain a tax clearance certificate from the Federal Tax Authority (FTA), including VAT deregistration.

Step 5: Submission of Liquidation Report

  • The liquidator prepares a final report detailing asset liquidation, debt settlement, and distribution of remaining assets (if any) to shareholders.

Step 6: Final Deregistration

  • Submit all required documents, including the liquidation report and clearance certificates, to the relevant authority for final deregistration.
  1. Key Documents Required
  1. Notarized shareholders’ resolution.
  2. Appointment letter of the liquidator.
  3. Trade license copy.
  4. Memorandum of Association (MOA).
  5. Clearance certificates from utilities, FTA, and other relevant entities.
  6. Final liquidation report from the liquidator.
  1. Specific Considerations for Free Zone LLCs
  • Free Zone Authority Approval: Additional approval may be required from the respective free zone authority.
  • Custom Procedures: Some free zones have specific requirements, such as returning leased office spaces or canceling visas for employees and partners.
  1. Key Factors in Involuntary Dissolution
  1. Court Involvement: The court appoints a liquidator and oversees the process.
  2. Creditor Claims: Creditors may initiate dissolution if the company defaults on its obligations.
  1. Costs of LLC Dissolution

The costs can vary depending on factors like licensing authority, liquidation fees, outstanding liabilities, and employee settlements. It is essential to budget for:

  • Liquidator fees.
  • License cancellation fees.
  • Clearance certificate fees.
  1. Common Challenges in LLC Dissolution
  • Unsettled Debts: Ensuring all creditors are paid.
  • Pending Legal Cases: Resolving any ongoing legal disputes.
  • Delayed Approvals: Waiting for clearance certificates or regulatory approvals.
  1. Practical Tips for Smooth Dissolution
  1. Plan Early: Prepare for liquidation well in advance to avoid delays.
  2. Engage Professionals: Hire experienced liquidators and legal advisors.
  3. Communicate Clearly: Notify stakeholders, employees, and creditors about the dissolution.
  4. Complete Obligations: Ensure all taxes, debts, and other liabilities are settled.
  1. Final Notes

Dissolving an LLC in the UAE is a meticulous process requiring compliance with legal and regulatory frameworks. Whether voluntary or involuntary, following the correct procedures is critical to avoid future liabilities or complications.