What You Need to Know Before Exiting the UAE - Fichte & ?· What You Need to Know Before Exiting the…

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  • 19th Floor, The Prism Tower, Business Bay, Sheikh Zayed Road, P.O Box 116637, Dubai, UAE Tel: +971 4 43 57 577 Fax: +971 4 43 57 578

    www.fichtelegal.com info@fichtelegal.com

    What You Need to Know Before Exiting the UAE

    As the UAE continues to grow, expats continue to move here

    for a better life and better opportunities. Guidance is offered

    for expats who wish to start their own businesses in the UAE,

    and the various options available for them. However, there

    is not much guidance for those who no longer wish to remain

    in the UAE. If you are planning on closing down your business

    and returning back home, there are a number of

    administrative and legal matters which you must attend to

    prior to your move.

    Winding up Your Business

    Many business owners who no longer wish to operate their

    businesses in the UAE will just cease paying their trade license fees and hope to be struck off the

    commercial register. However, this is method is inappropriate for the cancellation of a license and may

    subject the shareholders and directors to liability and other serious consequences. The directors are liable

    for existing debts and liabilities of the company until the company is officially dissolved or struck out.

    Article 295 of the UAE Companies Law (Federal Law no. 2 of 2015) states that a company may be dissolved

    for a number of reasons including:

    The term of the company has ended,

    The purpose for which the company has been set up expires,

    The company loses a significant amount of funds,

    The company merges with another company,

    If all the partners agree to terminate,

    A court order for dissolving the company is issued.

    Part eight of the UAE Companies Law stipulates various other provisions for dissolution of a company

    depending on the company type.

    If you wish to leave the UAE and close down your business, the best method is to dissolve the company

    by agreement of all the shareholders. It is important to ensure that there are no debts to be paid off by

    the company or any existing claims prior to commencing the process of winding up the company, this

    evidenced by virtue of Article 304 of the UAE Companies law which states that unless the debts are paid

    off, no partner is entitled to any part of the companys share capital upon dissolution. Once all the

    companys commercial affairs are in order, then the process for liquidation may commence. The directors

    must ensure that all assets of the company are transferred, and all commercial contracts are terminated

    mutually by the companys customers or clients. The shareholders must sign a resolution stating their

    intention to dissolve the company. Such a resolution must be notarized or fully legalized. The shareholders

    must also appoint a liquidator in the same resolution, this step Is mandatory. Articles 306-326 of the UAE

    Companies Law stipulates the various rights and responsibilities of the liquidators. Thereafter, the parties

    or authorized representatives can then approach the Department of Economic Development (DED), or the

    Sarra Alsamarrai Associate Corporate and Banking Practice Fichte & Co

    sarra.alsamarrai@fichtelegal.com

    http://www.fichtelegal.com/mailto:info@fichtelegal.comhttp://www.fichtelegal.com/mailto:sarra.alsamarrai@fichtelegal.com

  • 19th Floor, The Prism Tower, Business Bay, Sheikh Zayed Road, P.O Box 116637, Dubai, UAE Tel: +971 4 43 57 577 Fax: +971 4 43 57 578

    www.fichtelegal.com info@fichtelegal.com

    relevant free-zone authority (if the company is incorporated in the free zone), to submit all the documents

    and pay the fees. A public announcement is made via a newspaper advertisement for an average of 45

    days for the purposes of providing more time for potential creditors to come forward.

    Another essential process, and most likely the costliest, is to ensure all employees visas have been

    cancelled (including the managers and shareholders who are sponsored by the company), and all their

    dues have been paid- i.e. notice periods, and end of service. A no-objection certificate must be obtained

    from the Ministry of Human Resources and Emiratisation (MOHRE) to prove that there are no employees

    left under the companys license.

    Further approvals may be required from external authorities, depending on the business activities. In

    addition, all utility bills must be cleared off, and accounts with the Dubai Electricity and Water Authority

    (DEWA) as well as Etisalat and/or DU must be cancelled. The companys bank account must also be closed,

    and all funds transferred. Please do note that each bank will have their own requirements and so therefore

    it would be best to clarify with the companys own bank which documents are required and what the

    procedure entails for closing of a bank account.

    A final application is then made to the DED (or the relevant free zone) upon submitting the liquidators

    report, the newspaper announcement, visa cancellation papers, NOCs from the MOHRE, and other

    authorities, bank account closure letter, as well as the resolution from the shareholders. The DED or

    relevant free zone authority will then issue a certificate of cancellation, evidencing the dissolution of the

    company.

    The above procedure may differ slightly for different types of companies (such as sole establishments or

    branches of foreign companies) or companies incorporated within the free-zones. Some free zone

    authorities might have their own regulations surrounding the dissolution of companies, which would be

    very similar to the process for companies incorporated in the mainland. If the free zone authorities fail to

    regulate a certain aspect of the dissolution process, then reference is made to the UAE Companies Law.

    Writing Off the Company

    Article 303 of the UAE Companies Law states that a company may be struck off the commercial register if

    the Ministry of Economy or the DED determines that that a company has ceased to conduct its business

    or that it conducts such business in contravention of the UAE Companies Law or the regulations issued

    thereunder. In relation to the process, the Ministry of Economy or the DED (as applicable) will notify the

    company of its intention to strike off the company within three months from the date of the notice, unless

    a good reason is submitted by the company for not being struck off. If the Ministry of Economy or the

    DED, receives upon the expiry of the three months, a confirmation that the companys business is still

    under suspension or if the company fails to provide a reasonable justification for such suspension, the

    matter will be referred to the competent court to initiate the necessary procedure to liquidate the

    company.

    Liability of the directors, managers and shareholders of the company struck off in accordance with Article

    303 of the UAE Companies Law shall continue as if the company has not been dissolved. As such, they

    will be personally liable for any liability that may devolve upon the company. Therefore, it is essential for

    business owners not to rely on Article 303 for the dissolution of their businesses as it carries some serious

    consequences. Furthermore, such directors or partners of a company might face a ban if they exit the UAE

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  • 19th Floor, The Prism Tower, Business Bay, Sheikh Zayed Road, P.O Box 116637, Dubai, UAE Tel: +971 4 43 57 577 Fax: +971 4 43 57 578

    www.fichtelegal.com info@fichtelegal.com

    and ever decide to return to the UAE, even as a tourist. They would be held at the airport until all debts

    have been cleared.

    The New Bankruptcy Law

    If your company is unable to clear its debts and wish to dissolve for this purpose, it is essential to take into

    account the provisions of the new UAE Bankruptcy Law (Federal Law no. 9 of 2016). The new Bankruptcy

    Law came into effect in December 2016 and encompasses companies incorporated under the UAE

    Companies Law as well as free-zones. The old law offered few options other than liquidation to companies

    that faced insolvency and was regarded as outdated. The Bankruptcy Law expressly repeals UAEs

    insolvency regime which was set out in Chapter V of the Commercial Transactions Law, and introduces

    several progressive provisions.

    Companies struggling with financial losses and debts may now apply for restructuring or insolvency and

    liquidation which involves a court order, depending on the debts of the company. This comprehensive law

    also replaces several bankruptcy-related crimes under the UAEs Penal Code. Under the old regime, a

    defaulting debtor was required to apply to be declared bankrupt within 30 days. Failure to do so exposed

    the company to hefty fines and potential imprisonment. This encouraged many business owners to

    abscond, rather than try to restructure their businesses. A significant change under the new law is the de-

    criminalization of non-declaration. Now, a failure to declare bankruptcy can disqualify the debtor, but will

    not be regarded as a criminal offence. In addition, the new law prevents creditors from bringing criminal

    charges against executives of insolvent companies for bounced cheques while a court ordered

    restructuring is underway.

    The new Bankruptcy Law paves the way for companies struggling to pay off their debts, and offers suitable

    alternatives which companies should take into consideration.

    Conclusion

    It is clear from the above that there are various methods available for companies to close down their

    businesses. Different procedures will apply for different types of companies. It is essential to follow the

    relevant rules and regulations when winding up your business in order to avoid facing hefty penalties or

    other administrative issues. There are also many law firms or business consultants who will be able to

    assist with dissolving your company. Otherwise, the authorities themselves can provide some advice as

    to the best ways to dissolve your business.

    http://www.fichtelegal.com/mailto:info@fichtelegal.comhttp://www.fichtelegal.com/