LLC Company Winding Up

Liquidation Report for Winding up a Company on time!

It is mandatory for any company created in the UAE that wishes to close its doors permanently to dissolve the company according to the rules outlined in the laws leading to company formation and dissolution. Furthermore, every company formed in the UAE must register with the appropriate government bodies to acquire a license to operate. As a result, before the dissolution procedure begins, the firm that plans to close the business must notify the relevant authorities of the intention to cease the business and the reasons for doing so, to prevent any uninvited fines and penalties as a result of the expired license. The technique used to dissolve a corporation differs depending on the type of corporation.

However, winding up an LLC company is not a simple task and involves various steps. For instance, you need to settle utility bills, get clearance from government bodies, cancel workers’ visas, clear off debts and much more.

Types of LLC Company Winding Up

Voluntary Liquidation

• It is initiated by the owners or shareholders and is often a result of strategic decision-making.
• The most common causes are exit from business, restructuring, or financial reorganization. A licensed liquidator will usually be appointed to run assets, settle debts, and finalize the LLC company liquidation process.

Compulsory  Liquidation

• It is usually forced by the court due to insolvency or extreme financial stress.
• In compulsory liquidation, the court appoints a liquidator to manage the company winding-up process, including paying creditors and redeeming debts.

Reasons for LLC Company Winding Up

• Insolvency: When a company faces financial incapability to meet its obligations, leading to the need for LLC company liquidation.
• Market Withdrawal: Lack of profitability or market fit within the UAE may lead to strategic winding up.
• Structural Changes: Mergers, downsizing, or shifts in business strategy often require company liquidation.
• Non-Compliance: Unresolved legal or regulatory issues can necessitate liquidation to avoid penalties.
• Owner’s Directive: Personal reasons, such as retirement or relocation, prompting business cessation.
• Economic Downturn: Adverse economic fluctuations or market contractions influencing the company’s viability.
• Business Lack of Strive: Inability to meet KPIs or achieve growth goals may trigger the decision to wind up the company.

Challenges and Considerations in LLC Company Winding Up

• Legal Compliance: In the case of LLC company liquidation, legal requirements under UAE laws must not be breached to avoid a penalty and ensure a hassle-free process.
• Settlement of Debts and Assets Distribution: Debts must be settled and assets distributed justly among the creditors and the shareholders to fulfill their obligations and avoid any disputes.
• Documentation: Keeping proper records and submitting them to UAE authorities on time ensures that the process is smooth and all formalities are met for the closure of the company.

Procedure for winding up an LLC company in Dubai, UAE

The process to wind up an LLC company is usually initiated by the company's board of directors in situations when the company has incurred losses equal to half of its issued capital (50%). A general meeting of the partners is conducted by the board of directors to request consent for the company's dissolution. Furthermore, if the losses have reached three-quarters of the capital (75%), the partners who control one-quarter of the capital (25%) can order the company's dissolution. Whatever the situation may be, a company's dissolution can only be carried out after it has been approved by the general assembly, which means a resolution should be passed by the company's shareholders to dissolve the company.

How can Reyson Badger help?

Winding up an LLC company in UAE is a complex and time-consuming process. Reyson Badger can simplify the whole process for you. We abide by all the legal issues and assist you to avoid any extra charges in the finalization of the liquidation report. We also help you with other formalities to wind up the company in time.