‘De-registration’ or, in other words, ‘cancellation’, is a common concept introduced by various licensing authorities in UAE to close limited liability companies.
Deregistration is not a specific concept under a specific regulation in the UAE, however, it is a practical procedure introduced by some relevant licensing authorities in various Emirates, with the ultimate aim of canceling the license and closing the company. The advantage of deregistration is that it is a quick process with less stringent requirements compared to the liquidation process, which is the usual and only way to close companies in UAE law by most licensing authorities. It is therefore important to distinguish between the liquidation and cancellation processes and to understand the requirements of each process.
The requirements for deregistration are generally governed by the internal rules and guidance issued by the relevant licensing authorities. In general, the main requirements for deregistration are:
- A decision issued by the company confirming the cancellation and closure of the license
Authorization will be required from the relevant authorities (i.e. telecommunications service provider, SEWA, Emirates Post, etc.)
CANCELLATION OF THE MEMORANDUM OF ASSOCIATION.
Following the submission of a completed application and payment of the cancellation fee, the Authority will issue a final certificate confirming the cancellation and revocation of the Company’s license.
Liquidation may be either voluntary or compulsory (by court order). Voluntary liquidation is where the shareholders agree to wind up the company and appoint a liquidator by passing a shareholders’ resolution. If there is a dispute between the shareholders and the liquidation is requested by the shareholder(s) through the court, the competent court chooses the liquidation method to be used and formally appoints the liquidator. In any event, the liquidator’s task does not end with the death of the members, the declaration of bankruptcy, insolvency, or the prohibition imposed on the partners, even if the liquidator has been appointed by the partners.
THE MAIN REQUIREMENTS OF A WINDING-UP (ESPECIALLY A VOLUNTARY WINDING-UP) ARE:
- A resolution to be adopted by the company approving the liquidation of the company and the appointment of a liquidator;
- Authorization from the relevant authorities will be required;
- The advertisement or notice is published in two local daily newspapers (one of which is in Arabic) for at least 45 days
- The appointed liquidator must prepare and submit a liquidation report to the relevant licensing authority.
Once the liquidation process is completed and the liquidator has submitted the liquidation report to the relevant licensing authority, the latter shall issue a certificate of liquidation notifying the completion of the liquidation and the closure of the business.
LIABILITY AND OTHER LEGAL CONSEQUENCES
As a practical matter, in view of the above, a company may be removed from the register without going through the liquidation process and, more specifically, without the appointment of a liquidator who would have to inform the creditors and prepare a liquidation report.
WINDING-UP AND APPOINTMENT OF A LIQUIDATOR
The absence of a liquidator and, consequently, of a winding-up report in the process of deregistration raises the question of whether the appointment of a liquidator and, more generally, the liquidation and winding-up measures will still be necessary even if the company is removed from the register.
INFORMATION ABOUT THE COMPANY’S CREDITORS
During the liquidation process, the liquidator must arrange for publication in accordance with section 316 of the 2015 Act, which provides:
“All debts of the company shall immediately become unsettled upon its winding up. The liquidator shall notify all creditors of the commencement of the winding-up by registered letter, return receipt requested, and inviting creditors to submit their claims. The notice shall be published in two local daily newspapers, one of which shall be in Arabic. In any event, the notice of liquidation shall include a time limit of at least 45 days from the date of the notice for creditors to lodge their claims.
The deregistration does not require creditors to be notified and may therefore raise the question of the liability of directors and shareholders to the company’s creditors after deregistration. Therefore, in order to avoid a situation where shareholders and managers may remain liable to creditors (s) or a third party(ies), the deregistration route should be used with due caution.
The concept of cancellation of registration arose from the general procedural practices adopted by the various licensing authorities in the UAE.
The deregistration route can be understood as a way to facilitate the cancellation of a limited liability company’s license and ensure its closure as expeditiously as possible, leaving the decision on dissolution and winding-up formalities to the shareholders, taking into account the circumstances of the company. However, special attention should be paid to the notification and publication requirements during the transaction; otherwise, the directors and shareholders of the company may remain liable for any (or all) debts related to the business.