Liquidation Services in Abu Dhabi

Liquidation is an activity connected with the winding up of firm affairs, liquidation of debts, and dispersal of assets among the respective stakeholders. In Abu Dhabi, a systematic disposal of assets leads to the eventual payment of liabilities and liquidation of the company in that order. The whole process is complex and requires technical expertise to ensure the aftereffects of regulatory compliance, risk minimization about legal and financial matters, and easy closure of the businesses in question. Liquidation is essential to business closure. In essence, its most significant importance is the effective distribution of available assets among stakeholders, settling debts and liabilities, protecting creditors' interests, and safeguarding the employee and shareholder interests, while providing an official end to the business operations.

The liquidation environment in Abu Dhabi is governed by Federal Law No. 2 of 2015, or the Commercial Companies Law; Federal Decree-Law No. 9 of 2016, or the Bankruptcy Law; Abu Dhabi Commercial Companies Regulation; and regulations under the UAE Ministry of Economy. There are also laws there that govern procedures for voluntary and compulsory liquidation, provisional liquidation, and restructuring.

Liquidation procedures in Abu Dhabi would comprise asset valuation and disposal, debt settlement and negotiation, as well as regulatory compliance and reporting. Expert liquidation services ensure smooth business closure with regulatory requirements complied with, efficient asset disposal and debt settlement, and minimum legal and financial risk. Our team provides general liquidation services in Abu Dhabi, which are divided into compulsory and voluntary liquidation, provisional or restructuring liquidation, asset valuation and disposal, debt settlement or negotiations, regulatory compliance, and reporting.

Types of Liquidation

Liquidation is the process of winding up a company's financial affairs and distributing its assets to creditors and shareholders. There are two primary types of liquidation: Voluntary Liquidation and Compulsory Liquidation.

Voluntary Liquidation

Voluntary liquidation is when the company's directors or shareholders agree to wind up the business. Mostly, this arises when the company is insolvent and is, hence incapable of clearing some debts owed to other creditors. During this process, the directors of a company get to take control of the situation before it captures the attention of the creditors.

There are two types of this including:

• Creditors Voluntary Liquidation (CVL): Company directors take the initiative to liquidate the business when they realize that it's insolvent and cannot continue the business. Appoint a licensed insolvency practitioner to carry out the liquidation process.
• Members' Voluntary Liquidation (MVL): In this scenario, the solvent company wants to wind itself up because it has served its intention or the shareholders want to bring it to a halt. A declaration of solvency must then be lodged, with a statutory declaration confirming that all debts can be paid within a specified timeframe.

The major benefit of voluntary liquidation is that it provides for a more orderly settlement of debts and distribution of assets in the hands of directors.

Compulsory Liquidation

The second is the compulsory liquidation through a court order by creditors. This has often been the consequence of a winding-up petition presented by some creditor who has been owed over £750 for quite some time and has not received this amount. The court proceeds to assess the financial position of the company and, if they conclude that the company is insolvent, directs a winding-up order that places the company into liquidation from the very onset.

Key features of compulsory liquidation are

• Court Involvement: The courts have controlled the procedure, therefore the companies do not have control of time and also on the procedure.
• Official Receiver: As part of the implementation, an Official Receiver is appointed who oversees the liquidation procedure, investigates the firm's affairs, and reviews every detail of compliance with statutory requisites.
• Asset Realization: The liquidator takes control of the assets of the company and sells those to return money to the creditors based on priority in claims.

In compulsory liquidation, a failure to pay the debts within the given period is considered to be the last stage reached by creditors to obtain repayment. This may affect the reputation of the company very much and directors may face legal actions if misconduct arises from the investigation process.

Step-by-Step Process of Business Liquidation

Step 1: Appointment of Licenced Liquidator

• It begins with the appointment of a licensed insolvency practitioner or liquidator to handle the process.
• If there is a compulsory liquidation, the court would make an appointment of an Official Receiver as the liquidator.

Step 2: Public Advertisement to Creditors and other Stakeholders

• The liquidator publishes a public advertisement requesting claims by the creditors within a certain timeframe, generally 30 days from the date of liquidation.
• All the creditors and stakeholders, such as staff, shall be informed of the impending liquidation.

Step 3: Cancellation of Licenses and Permits

• The Registrar of Companies removes the company name. This can be considered as the dissolution of the legal corporation.
• All licenses, permits, and registrations, as issued by the relevant authorities to the business, must be canceled.

Steo 4: Liquidation of Assets and Settlement of Liabilities

• The liquidator forms a liquidation estate by preparing a list of the company's assets and values.
• The raised money shall be used to clear creditors through the stated mechanism of the Insolvency and Bankruptcy Code (IBC). Secured creditors, unsecured creditors, and shareholders come last.

Step 5: Final Audit and Tax Clearance

• A final report is submitted by the liquidator to AA after the distribution of proceeds.
• A final audit shall be done for compliance with legal requirements and tax obligations.
• Dissolve company Official dissolution after obtaining the necessary clearances for tax purposes

Liquidation should be fully completed within one year from the commencement of liquidation, even if applications for avoidance transactions are pending. In case of early dissolution, the liquidator may apply for dissolution at any time after the initial report is submitted.

Required Documents for Company Liquidation in Abu Dhabi

• Copy of the license
• Copy of the Memorandum of Association (MOA), with any changes
• Power of Attorney, if any
• Copies of all shareholders’ passports
• Copy of your Emirates identification
• Resolution of the shareholders
• De-registration application form

Role of Liquidators

Liquidators are the main agents in the liquidation process of a firm in Abu Dhabi, that is, winding up the financial affairs of a business and distributing the assets. Their major responsibilities are appointment, by themselves or through an order by the court; managing the assets of a company, and ensuring all creditor claims are catered for. The liquidators should be either the registered members or the registered practicing members of the professional bodies recognized and possess relevant qualifications. Above all, they should possess rich experience in the matters of insolvency or liquidation and should act with integrity and impartiality throughout the process.

Liquidators have a responsibility to handle the debts in that the creditor's claims are ascertained, and their payments are made in priority in consonance with the demands of the laws. The liquidator is involved in the selling of the company's assets, which is an avenue through which funds generated from such sales can be used to clear outstanding liabilities. Secured creditors are normally paid first, followed by unsecured creditors, and then shareholders. Because of such a structured approach, also makes for an equitable distribution of the assets in compliance with the applicable laws and regulations within Abu Dhabi. Proper management of these responsibilities, therefore, gives scope to navigate through the maze of liquidation while protecting the interests of all stakeholders involved.

Company Liquidation in Free Zone

In general, the liquidation of a free zone company, such as ADGM and KIZAD, is not different from that applicable to mainland-based companies. However, there are some unique considerations:

• Applicable Laws: Free zone companies are subject to applicable free zone-specific laws and regulations, as well as federal laws.
• Free Zone Authorities: The liquidators shall consult the relevant free zone authorities during the process of liquidation.
• Licenses and Permits: The liquidators should cancel all licenses and permits that have any relevance to the business activities of the company.

Common Challenges in Liquidation

• Managing Conflicts with Creditors: Decisions involving preference over which creditor's claim is superior or senior can often be contentious and time-consuming.
• Handling Outstanding Employee Settlements: Ensuring timely and fair settlement of employee dues, such as salaries, benefits, and end-of-service gratuity, is crucial but can be challenging.
• Asset Valuation: It becomes tough to value the assets that the corporation wishes to sell. This is especially true in cases where most of the assets are specialized or even quite complex in terms of owning them.
• Uncooperative Directors: When the company's directors do not cooperate, the liquidation process may be frustrated and made more difficult for liquidators to obtain information and assets.

Conclusion 

Professional liquidation services benefit through the smooth and efficient process of winding up, thereby enabling compliance with legal and regulatory requirements, protection from future liabilities, and optimal minimization of financial losses. Quality service through liquidation consultants ensures proper management of closure to safeguard business interests and relationships with other stakeholders. Reyson Badger specializes in providing comprehensive liquidation services. Liquidation, bankruptcy, or restructuring - Reyson Badger will accompany you on all steps to see that it is done accordingly and with minimal risks. Seek expert advice on the liquidation of your business from Reyson Badger.