Company liquidation in Dubai is one of the critical aspects of a business that business owners do not want to talk about until their firm inches toward insolvency. This is the reason why liquidation becomes a complex process even though it is regarded as the best exit strategy for nearly all types of businesses. Company liquidators in Dubai advise you to develop an exit strategy right from the moment you conceive a business plan.
If the exit strategy is not part of your business plan, you may have to face some nasty surprises and rude shocks when you try to close down your company in Dubai. Business owners who ignore this vital business mantra make some mistakes and unnecessarily delay the process of winding up a company in Dubai. In this blog, we will guide you through some of the common mistakes made by companies under liquidation so that you can avoid them if you face a similar situation in the future. Keep reading to learn more:
Not anticipating the liquidation
A true entrepreneur must be a visionary who can foresee the fate of the company they founded. Business owners should always be prepared for the worst-case scenario and make plans accordingly. A company may undergo liquidation in the UAE owing to myriad reasons such as debt, unfeasible operations, departure of the company founder, financial distress, loss of large contract or customer, company achieving its objective etc. The shareholders of the company must foresee any of these circumstances and plan for liquidation.
Ignoring voluntary liquidation when it’s necessary
The directors or shareholders of a company should make the right decisions at the right time. Sometimes, a company may be going through a rough patch for which voluntary liquidation might be the only sensible solution. For example, if you are a company under steep debts or financial distress, you should not wait to close it down if no other resolution is on the anvil. The creditors may approach a court to initiate the compulsory liquidation of your company.
You can avoid a creditor’s compulsory liquidation by opting for voluntary company liquidation in Dubai. In this way, you can settle the liabilities of all the stakeholders involved including creditors and employees. You can also avoid the reputation damage that may come through a compulsory liquidation initiated by a court.
Failing to apply for VAT Deregistration
Before you apply for voluntary company liquidation in the UAE, you must tie up all the loose ends. For example, you must apply for VAT deregistration if you are a VAT-registered entity under liquidation. The Federal Tax Authority (FTA) must receive your deregistration application within 20 days of becoming eligible for deregistration. Failing to meet these requirements will make you liable for a penalty of AED 10,000. Failing to apply for VAT de-registration is a common mistake made by companies under liquidation, causing delays at the time of winding up the company.
Not winding up branches or subsidiaries
If you are a company with branches or subsidiaries, you must close them down first. Once the parent company is shut down, it would be difficult for the shareholder or directors to close down the subsidiaries or branches because a board resolution is mandatory for branch liquidation. Seek the advice of company liquidators in Dubai to meet this requirement effectively.
Ignoring regulatory compliance checks
Many companies under liquidation in the UAE make the mistake of failing to assess their compliance status with the mandatory regulations. A company under liquidation must check if it must meet the requirements related to Economic Substance Regulations (ESR) and Ultimate Beneficial Ownership (UBO). Failing to meet ESR and UBO obligations will lead to hefty penalties and reputation damage.
Liquidate the right way through the best Liquidators in Dubai
Whether you are walking away from a profitable business to utilize the profits ties up in the company or shutting down the company due to debts, expert advice is critical in helping you make the right decision for you and your company. Company liquidators in Dubai such as Jitendra Business Consultants (JBC) can guide you through the entire process of winding up your company.
The process of company liquidation in Dubai involves a series of steps and requirements and we can make it simple and hassle-free for you. JBC has liquidated mainland, offshore and free zone companies across the UAE. Our highly qualified team of liquidators can execute the liquidation process seamlessly and in compliance with the existing regulations. JBC’s experience and learning curve will allow you to complete the process quickly.
