There are two types of company liquidation in UAE:
- voluntary liquidation
- compulsory liquidation
Voluntary liquidation (VCL) occurs when a company is solvent and no longer able to pay debts or continue trading. A liquidator is appointed in the case of a VCL. The company directors then commence a search for a new liquidator and a meeting of the Board is called to declare the company bankrupt.
A compulsory company liquidation process is conducted when a company is not solvent. When the Board meets to declare the company bankrupt, they appoint a Creditors Committee to oversee the company liquidation process and monitor the assets and accounts. Accounting and bookkeeping companies in UAE are also hired to monitor the assets and accountants. A creditor’s voluntary liquidation is when the Company Liquidator or the company administrators take over the assets and pay off creditors. The administrator is then required to report regularly on the company’s affairs.
Both types of company liquidation process have important pros and cons. When you are considering the best interests of the creditors and directors, it is always in the best interest of the business itself to ensure that everything possible to avoid such an event happens.
Step 1:The first step in any liquidation process is to ensure that it is registered with the Companies. Next, there must be a winding-up petition made by the Office of the Secretary of State in the county where the company has its registered office. This means that the company must enter into court proceedings and seek court action against those who are responsible for making up the missed payments or are not paying at all.
Step 2: Once a winding-up petition has been filed, the company liquidation process will begin. The company director or the company administrator will need to obtain court permission to sell or repossess any of the company assets. It also needs to be ensured that any assets acquired by the appointed insolvency practitioner are used to service the debts of the company.
Step 3:At this point it is worth understanding that the company liquidation process is not solely about the directors and officers of the business. A very essential piece of knowledge that any business needs when going through a company liquidation process is that of the basic concept of company liquidation. There are three fundamental processes that take place during the liquidation process.
Step 4:It is necessary for directors and officers of the company to attend one of the meetings that take place as a matter of routine, to discuss the ongoing events within the organization. This is often done within a formal company meeting that is called a board meeting. At board meetings, the company directors will be discussing issues and potential actions that can or have an effect on the company’s future operations. In this manner a basic understanding of the company liquidation process is vital to the success of the company.