DIFC Company Liquidation in UAE
DIFC Company Liquidation
The Dubai International Financial Center is one of the two Financial Free Zones recognized with a self-legislation, nevertheless, it is no exception to business liquidation. Thus, the Dubai International Financial Center companies need to outsource expert liquidation services to seamlessly carry out liquidation procedures.
Farahat & Co. is an approved and reputable liquidator in Dubai International Financial Center. In June 2019, the DIFC introduced the Insolvency Law to regulate liquidation procedures and to mitigate the financial risk of bankruptcy for companies.
Provisions of the DIFC Insolvency Law
The Dubai International Financial Center statute confers the following:
● Rehabilitation Plan Notification Ought to Be Enforced
A 120-day moratorium period has to be enforced for the liquidating business to avert any credit or provisions as per contracts from enforcing their rights.
● Appointing an Administrator in Case of Mismanagement or Fraud
Winding up a company is influenced by several reasons, which might include, fraud elements in a business, mismanagement of business conduct, and undertaking of illegal trade, among other reasons. The DIFC appoints an administrator who is an independent insolvency practitioner/executor. The specified administrator looks into the company’s functions, even throughout the moratorium period
DIFC Company Liquidation Procedure in 4 Different Ways
The four methods include:
- Voluntary winding up of the business
- De-registration of the business
- Compulsory winding up of the business
- Transfer of Incorporation
Voluntarily Company Liquidation in DIFC?
The company, its board members, and the shareholders can decide on the company’s cessation of operation or winding up. In this case, a designated Power of Attorney ought to be appointed to sign on behalf of the company’s shareholders. Moreover, all the shareholders should freely consent and sign the shareholder resolution.
After this, the formal procedure of initiating voluntary winding up can be conducted. Further, the business has to appoint an approved DIFC liquidator, the shareholder’s resolution must form an agreement with a DIFC liquidator and obtain an acceptance letter. Still more, the entity ought to submit a statutory director’s declaration along with the shareholder resolution.
- After 15 days, a notice should be published for three consecutive days after finalizing the shareholder’s resolution. However, the DIFC entity can only delay the time of notice publication for a maximum of 30 days.
- The DIFC-approved liquidator’s list is available on their website, and a DIFC entity can seek quotations for the same before appointing an approved liquidator.
- The liquidator’s report must be submitted to the DIFC Authority.
- The request to wind up the business must be submitted on the DIFC portal.
- Unless the lease agreement for the property or space rented has not expired, termination of the rental or lease contract is a requirement.
- The original Certificate of incorporation must be returned to the DIFC Authority.
- A NOC is required from the IT department if the business is run on DIFC property.
- Once the application is submitted on the portal, the DIFC Authority will review it and may ask for further justifications.
- If all the requirements are fulfilled, the company can dissolve, and the RoC (Registrar of Companies) will issue the Liquidation Certificate.
How to Liquidate a Company in DIFC?
There is a thin line between De-registering and Voluntarily Winding up a company. De-registering involves the process of removing the company from the list of DIFC entities. Once De-registered, the company can still operate outside the DIFC-Free Zone. A voluntary winding up of business may be due to uncertain reasons; however, de-registration of a company can mean that the company wants to exclude itself from the DIFC Registrar of Companies. For this reason, a company only seeking to de-register is not necessarily required to submit a liquidator’s report. The types of Companies that can deregister are:
- Recognized Companies ( RC)
- Recognized Limited Liability Partnerships ( RLLP)
- Limited Partnerships ( LP)
- Recognized Limited Partnerships ( RLP)
- General Partnerships (GP)
- Recognized General Partnerships ( RGP)
- Recognized Foundations ( RF)
What is a Compulsory Winding Up of Business in DIFC?
A court order initiates a compulsory winding-up process. The legal order is issued due to reasons such as non-compliance by the business, illegal activities, laundering, or bankruptcy.
- The DIFC liquidator has to submit a fully analyzed report so that it can be presented before the court if required.
- The court order in a compulsory winding-up process replaces the Shareholder’s Resolution and the statutory declaration requirements.
- The online portal access, in this case, is furnished to the liquidator to undertake the compulsory winding-up procedure.
Transfer of an Incorporation from DIFC
Businesses may transfer to a different jurisdiction due to different standards and regulations. In this case, companies can apply for a Transfer of Incorporation from the DIFC body. In this vein, DIFC entities ought to consider the below points when applying for the transfer on the DIFC portal:
- Provide a Special Resolution by the Shareholders approving the company’s transfer.
- The company directors ought to declare that the company is solvent and will not enter bankruptcy shortly and also prove that there is no ongoing case in any court where the company has filed for bankruptcy or applied for liquidation.
- A rental or lease termination proof is required if the company did not operate on the DIFC premises unless the lease has expired.
- Companies ought to provide evidence that the new jurisdiction complies with the requirements set by Articles 122 of DIFC companies law and Article 55 (2) of the Limited Partnership Law.
- To provide evidence in the form of a legal opinion that the company can transfer under the new jurisdiction and continue under the laws of the new jurisdiction
- A one-day newspaper publication. The publication must be sixty days before the application of Transfer of Incorporation from DIFC.
- Clearance consent issued by the Dubai Financial Services Authority is required if the company conducts financial activities.
- A certification of continuation certified by the issuing authority has to be provided.
- DIFC authorities provide a No Objection letter for the entity to move from the DIFC jurisdiction.
Avail Top DIFC Company Liquidation Services
To combat the complexities of solely undertaking the liquidation procedure, DIFC companies need to outsource trusted and efficient liquidation services. Farahat and Co. is a registered DIFC liquidator with a proven record of successfully assisting companies in executing liquidation procedures. We assist companies to enforce liquidation compliance and strategically plan winding-up procedures.
Our expert team renders top-notch services and customer-based solutions that mitigate companies’ specified needs. Thus, call us today and we shall be happy to assist you!
Cost to Cancel Trade License in DIFC
Fees and dues are obliged to be submitted to the relevant deregistration department to complete the execution of business license cancellation in Dubai International Financial Centre (DIFC). Charges for business liquidation are almost the same in all free zones and might not exceed 6500 dirhams. However, if you are subject to fines or if your trade license has expired and not renewed then you will have to submit additional charges. The authorized liquidator must keep account of all transactional activities and the hours devoted to the procedure of liquidation. Authorized liquidators in DIFC typically request a written agreement that demands fees and charges of liquidation to be submitted on time when the board members gather. Either in a voluntary liquidation process or obligatory liquidation process, the approved liquidator is expected to detail all aspects of charges that are to be compensated for the expert’s duties. Prior to the termination process, all creditors should reach an agreement on the aforementioned. When the expenses of hiring a liquidator exceed the original estimation of the shareholders, the extra costs will not be compensated unless the creditors consent to pay these. Asset realizations will be generally utilized to cover the costs and fees of a business DIFC liquidation.
