Why you must Deregister your Business License While Shutting Company

Say, you have successfully carried out a Dubai business setup and superintended your company for a period of time. But due to adversities, you’re coerced into shutting it down and are looking for ways to cease operations.

The first thing you must do is begin the process of deregistering your business license. Do what you may, but this is one devoir that you should never avoid, as not cancelling your business license spells trouble and will put your company’s reputation at stake.

Why Cancelling the License upon Business Closure is sine qua non

It is imperative for the relevant government authorities to stay updated with your business proceedings so that you do not incur any undue mulcts or penalties. The same holds true for your trade license. If it’s a shareholding company you’re part of, it becomes incumbent on you to settle any liabilities towards business partners.

How do I go on About it?

It depends on your business structure and how you carried out your business setup in Dubai.

For companies and sole proprietorships, the procedure is straight-forward, for all you have to do is apply for the license cancellation through the Department of Economic Development (DED) and obtain other clearances from:

• Directorate of Residency & Foreign Affairs
• Ministry of Human Resources & Emiratisation
• The Relevant Water and Electricity Authority (ADDC, DEWA, etc.)
• The leasing entity, etc.

However, like mentioned before, if you’re part of a shareholding company, the procedure is as tedious as company formation in Dubai, because it requires liquidating the assets and shares, and reclamation and reimbursement of debts to the creditors before finally approaching DED.

Closure of Mainland Company

A liquidator must be consigned the process of liquidation if the legal form of your business is one of the following:

• Simple Limited Partnership
• Private Joint Stock Company
• Public Joint Stock Company
• Limited Liability Company (LLC)
• General Partnership

Procedure of Dissolving all Companies

The procedure can be sectionalized into two stages:

Stage 1:

1. Prepare a notarized minute of the general assembly that confirms the business liquidation and the appointment of the liquidator.
2. Arrange for an official letter that confirms the duty of the registered liquidator.
3. Approach DED or any other registered agent, and apply for the cancellation by filling in the necessary form.
4. You will then be issued a liquidation certificate from DED.
5. After procuring the liquidation certificate, publish the notice of the liquidation in two local newspapers.
6. The notice will grant the debtors a grace period of 45 days from the date of issuance to submit their claims.

Stage 2:

1. A declaration form should be submitted by the liquidators and other partners to DED stating that there is no objection from any other parties involved during the grace period.
2. Procure all other clearances from other government authorities to cancel a license.
3. Apply for cancellation of the firm card at the Ministry of Human Resources & Emiratisation.
4. Abrogate the foreign partners’ visas which were sponsored by the company at the respective General Directorate of Residency & Foreign Affairs (GDRFA).
5. Submit all the above accrued documents to obtain approval for final cancellation.
6. A specified amount will be apprised by DED.
7. You will then receive a certificate of deregistration after the fee payment is done.

Closure of a Free Zone Company

According to DMCC, there are 3 ways of closing your business:

• Summary Winding Up: This type of closure is preferred by companies that have either no liabilities or are able to exempt all attached liabilities within 6 months. The procedure commences with a statement of solvency.
• Creditors Winding Up: This type of closure can be pursued if the company passes a resolution for winding up. This is also accompanied by a meeting with the company’s creditors.
• Bankruptcy: This procedure can be done through the court under the provisions of UAE Commercial Transactions Law No. 18 of 1993

In addition to ceasing operations, you will also have to apply for closing the business through DMCC’s Member Portal. As an outcome of submitting the company’s termination application, the respective authorities, duties and responsibilities of the directors of the company will be terminated immediately. This will be announced in a local Arabic newspaper. After this, DMCC authorities will ensure the final termination of the company and issue the termination letters.

You will also be required to cancel all the employees’ visas and work permits. This process entails the coordination of both Department of Naturalisation and Residency and the Ministry of Human Resources and Emiratisation.

In the last step, you will also have to give your employees a two-month, paid notice period before ending the contract with them. You could also choose to keep your employees’ resident visas until the company’s trade license expires. Then, the company can proceed with cancelling all the employees’ utilities.