No matter of what type of business you own in the UAE, you must cancel your business licence and all related permits associated with it when you have made your decision to close it down. This page provides a summary of the formalities for closing your business and cancelling its licence properly.
Why cancelling the licence is a requirement upon business closure?
It is important for relevant government entities to know that you are no longer in the business so you will avoid any accumulated fines and penalties incurred upon your licence, when it is not renewed upon expiry date.
If you are in a shareholding company, it is important to discharge your liabilities towards creditors and partners and protect your interests and shares.
It is also wise to put your goodwill and business reputation in perspective, if you decide to open a business again.
Formalities for cancelling your business licence
Cancelling the licence depends on the form of your company. For establishments and sole proprietorships, the process is simple because all you need to do is to apply for cancellation through DED and acquire all relevant clearances from:
- Ministry of Human Resources and Emiratisation
- Directorate of Residency and Foreigners Affairs
- the relevant water and electricity authority
- the leasing entity etc.
However, for companies with shares, the process is longer because it requires liquidating the shares, collecting the debts and paying the creditors before finalising with DED.
Companies which require a liquidator
You need to appoint a liquidator if the legal form of your company is one of these:
- General Partnership
- Limited Liability Company
- Simple Limited Partnership
- Public Joint Stock Company
- Private Joint Stock Company
The process involves two stages:
Stage 1:
- Prepare a notarised minutes of the general assembly confirming the company liquidation and the appointment of a liquidator.
- Arrange an official letter by a registered liquidator accepting the duty.
- Apply for cancellation by filling the required form through DED or other approved channels.
- DED will issue a liquidation certificate.
- Publish the notice of liquidation in two local newspapers.
- The notice gives the debtors a grace period of 45 days from the date of issue to submit their claims.
Stage 2:
- Submit to DED a declaration letter from the liquidator and the partners indicating no objection from any other parties during the grace period.
- Collect required approvals of other government bodies to cancel a licence.
- Cancel the firm card at Ministry of Human Resources and Emiratisation.
- Cancel the foreign partners’ visas sponsored by the company at the respective General Directorate of Residency & Foreigners Affairs
- Submit all the above documents to get the approval for final cancellation.
- DED will determine the fees.
- You can receive the certificate of deregistration (cancellation) after paying the requested fees.
Freezing a trade licence
Freezing a licence is different than terminating a licence completely.
In Dubai, companies may keep their trade licences inactive for three years by paying a certain freezing fee. However, they cannot extend it beyond that specific period.
According to the website of DMCC, there are three types of closures. They are:
- Summary winding up – this can be done in cases where a company has either no liabilities or is able to discharge its liabilities within 6 months and commences with a statement of solvency
- Creditors winding up – this can be done when the company passes a resolution for winding up and is followed by a meeting with the company’s creditors
- Bankruptcy – this can be done by the court under UAE Commercial Transactions Law No. 18 of 1993.
Closing a business entails more than just ceasing operations. In DMCC, you need to apply for closing the business through the member portal. The authorities, duties and responsibilities of the Directors of the company will be terminated as an effect of the submission of the company termination application. The application will be reviewed and processed. This will be followed by an announcement in a local Arabic newspaper. DMCC authorities will then file the final termination of the company and issue termination letters.
In JAFZA, you must notify the authorities three months prior for the office and warehouse facility and 6 months prior for plot facility.
In all cases, you will need to cancel the employees’ visas and their work permits. Dubai portal explains that this requires coordination with both Department of Naturalisation and Residency and Ministry of Human Resources and Emiratisation.
As per the UAE’s Labour Law, employers are required to give their employees a two-month, paid notice period before terminating their contracts. In many cases, employees can keep their residency visas until the company’s trade licence runs out. Then, the company needs to cancel utilities and telecommunication services. Collect an NOC from the utilities providing company for processing the closure.
