Liquidation of Limited Liability Companies (LLC) under UAE Law ⚖️

Liquidation of Limited Liability Companies (LLC) under UAE Law ⚖️


 

The liquidation of a Limited Liability Company (LLC) is the final legal pathway to terminate its existence as a corporate entity. This process aims to settle all rights and obligations, ensuring the partners' discharge of liability before the law prior to the final deregistration from the Commercial Register.

Objectives of the Liquidation Process

  • Settlement of Obligations: Paying off all debts and financial dues to creditors.

  • Asset Liquidation: Converting the company’s movable and immovable property into cash liquidity.

  • Distribution of Surplus: Distributing remaining funds among partners according to their respective shares in the capital.

Legal and Practical Grounds for Liquidation in the UAE

There are several reasons that drive partners to decide on liquidation according to Federal Decree-Law No. (32) of 2021, most notably:

  1. Accumulated Losses: The company’s inability to continue generating profits that cover its operating costs.

  2. Expiry of Term: The end of the period specified for the company in its Memorandum of Association without renewal.

  3. Internal Disputes: Partners reaching a deadlock in management or a partner's desire to withdraw.

  4. Restructuring: The desire to change the business activity or transform into another legal form.

  5. Legal Violations: Loss of licenses or the issuance of a court judgment to dissolve the company.

The Liquidator: The Pillar of the Process

Once the liquidation decision is issued, management authority shifts from the Manager to the Liquidator. Their responsibilities include:

  • Inventorying company assets and liabilities and preparing financial statements.

  • Collecting company debts from third parties and settling outstanding claims.

  • Representing the company before the judiciary and government entities during the liquidation period.

  • Preparing the final liquidation report for approval by the partners.

LLC Liquidation Resolution Template (Guiding Format)

To ensure the validity of procedures, the partners' resolution must be drafted accurately and notarized by a Notary Public. Here is the approved format:

We, the partners of [Company Name], registered under License No. [License Number] in the Emirate of [Emirate Name], have unanimously resolved the following:

  1. To place the company under voluntary liquidation in accordance with the provisions of the UAE Commercial Companies Law.

  2. To appoint Mr. [Liquidator's Name] as the company's legal liquidator, granting him all necessary powers.

  3. To task the liquidator with inventorying assets, settling obligations, and distributing remaining funds to the partners.

  4. To strike the company off the Commercial Register after completing all legal and financial procedures.

  • Costs: Government fees (including official advertisements) range between AED 3,000 to AED 8,000, varying based on the licensing authority (Local or Free Zone).

  • Duration: The process typically takes between 2 to 6 months, depending on the speed of financial settlements and the statutory notice period.

For more information or to book a legal consultation, contact us via: WhatsApp: 0585373400 Website: www.dralaanasr.com

 Insolvency, Lawyer, Legal Consultant, Court, Commercial Arbitration, Judicial Ruling, Courts, Dubai Courts, Lawyer in Dubai.


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