There are several reasons which may lead shareholders to decide to cease the operational business in a company. Operational expenses or overheads may be too high, customers may not keep the payment deadlines or are in default at all, the distribution strategy established by the management does not represent the most beneficial- and cost-efficient strategy in the local market, etc., the list of reasons is endless.
Ceasing to operate does not just mean to practically stop the operational business but requires a liquidation of the company and the company assets especially under the UAE commercial companies’ law and customs law.
SBS Consulting’s approach is to evaluate the status of the company first and – as a consequence of no sustainable restructuring feasibility – to comprehensively guide the company through the liquidation process, provided there is no economical basis for a continuation of the business. This includes the consideration of all legal- and tax matters which may be related to the company de-registration at the concerned authorities.
The liquidation process necessarily includes the following steps:
- Evaluation of the current status of the target company
- Instead of immediately running into liquidation we recommend evaluating the legal- and economical status of the establishment first in order to find the proper solution for the client, and minimizing the client´s legal and potential tax obligations at the same time
- Involving the concerned authorities
- We highly recommend clarifying the detailed process with the concerned authorities, such as Free Zone or mainland authorities, customs and tax authorities in order to have a full and clear picture of the procedure since it may differ from authority to authority
- Preparation of corporate documentation
- We comprehensively prepare the legal documentation for the liquidation of the company based on the requirements requested by the concerned authorities – this includes a shareholder/ board resolution, preparing the application forms, drafting a comprehensive power of attorney in order to represent the company in front of all authorities, requesting the liquidation report, bank letters etc.
- De-registration of the target company
- Once the documentation is ready, we submit the same to the authority in order to obtain the official liquidation certificate
- VAT De-registration
- The final phase will be the VAT De-registration – provided the company has been obliged to register for VAT purposes in the past on a basis of rendering taxable supplies
Where a sustainable cost restructuring or a re-development of the distribution strategy is not feasible due to the market situation, a liquidation of the company may be the proper way to reduce further losses and reputation in the market.