Board Resolution for Winding Up of Company in the UAE is an important strategic decision taken by the board of directors, involving the legal termination of a company’s operations and the sale of its assets to settle its liabilities. This process is regulated by UAE corporate laws and requires adherence to specific procedures to ensure transparency and protect the rights of all stakeholders.
Board Resolution for Winding up of Company
The board Resolution for Winding up of Company for several reasons, including:
- The purpose of the company’s establishment has expired: If the company was established for a specific project or purpose that has been accomplished.
- Achievement of operational objectives: When the company deems it no longer feasible to continue operating after achieving its initial objectives.
- Accumulated losses: If the company is experiencing continuous financial losses that make its continuation economically unfeasible.
- Inability to repay debts: If the company becomes insolvent and is unable to meet its financial obligations to creditors.
- Restructuring: As part of a broader plan to restructure the group or its subsidiaries.
- Market or industry changes: If the business environment becomes unfavorable for the company’s continued operations.
- Disagreements between partners: In some cases, fundamental disagreements between partners can lead to a decision to liquidate.
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Key Steps for a Board of Directors Resolution
When deciding to board Resolution for Winding up of Company, the board must follow the following steps and procedures:
- Convening a Board of Directors Meeting: A board meeting must be convened to discuss and examine the reasons for liquidation and assess the financial and legal status of the company.
- Issuing the Liquidation Resolution: The Board of Directors must issue a clear and detailed liquidation resolution, specifying the reasons for the liquidation and its effective date.
- Appointing a Liquidator: Appointing an approved liquidator is a crucial step. The liquidator will be responsible for managing the liquidation process, including collecting assets, repaying debts, and distributing surplus funds to shareholders. The liquidator must be an audit firm or an individual licensed to practice in the UAE.
- Notifying Official Authorities: The relevant government entities (such as the Department of Economic Development and other regulatory authorities) must be notified of the liquidation decision and the appointment of the liquidator.
- Notifying Shareholders and Creditors: All shareholders and creditors must be informed of the liquidation decision and given a period of time to submit their claims. This is usually done through an announcement in official newspapers.
- Preparing the Liquidation Budget: The liquidator prepares a detailed budget showing the company’s assets and liabilities to estimate the financial position before the actual liquidation process begins.
- Sale of Assets and Settlement of Liabilities: The liquidator undertakes the sale of the company’s assets and the settlement of all outstanding debts and liabilities.
- Surplus Distribution: After all debts are paid, any remaining surplus is distributed to shareholders according to their shares.
- Submitting the Final Report: The liquidator submits a final report on the liquidation process to the Board of Directors and the relevant authorities.
- Delisting the Company from the Commercial Register: After all procedures have been completed and all obligations have been settled, the company’s name is permanently delisted from the Commercial Register.
Implications of the Liquidation Decision
Liquidation undoubtedly has significant legal and financial implications, including:
- Loss of the Company’s Legal Personality: Once liquidation is completed and the company is delisted, it loses its legal existence.
- Cessation of All Business Activities: The company ceases to engage in any business activities other than those necessary for the liquidation process.
- Liquidation of Assets and Debts: All of the company’s assets are converted into cash to repay its debts.
- Protecting Creditors’ Rights: An orderly liquidation process ensures that creditors’ debts are repaid according to legal priority.
- Closing Company Accounts: All of the company’s bank accounts are closed after the liquidation process is complete.
A Board Resolution: How Do You Write One?
The board Resolution for Winding up of Company in UAE is an important legal step that requires precise and clear drafting. The resolution must include all essential details to ensure compliance with applicable regulations and protect the interests of all parties involved. Here’s how to draft it effectively:
Header
The title should be clear and specific, such as:
“Board of Directors Resolution No. (Write the resolution number) dated (Write the date) to liquidate (Write the company name)”
Parties Involved
List the names of the board members present and absent (if any), and specify their roles. For example:
“The Board of Directors of [Company Name] (the “Company”) held a meeting on [date] at [location], attended by:
[Name of Board Member 1] (Chairman)
[Name of Board Member 2] (Member)
[Name of Board Member 3] (Member)
[Name of Board Member 4] (Member)”
Background and Preamble
Briefly explain the reasons behind the decision to liquidate. These reasons could be financial, operational, or strategic. For example:
“Based on the economic and operational challenges the Company has faced recently, and after a comprehensive review of the Company’s financial and commercial situation, and with the aim of protecting the interests of shareholders and creditors, the Board of Directors has decided to initiate liquidation proceedings.”
Key Resolutions
Here are the essential provisions that determine the liquidation process:
Approval of Liquidation:
“The Board of Directors unanimously approves the voluntary/mandatory liquidation of [Company Name] (select as appropriate) in accordance with the provisions of Federal Law No. (32) of 2021 regarding Commercial Companies and the executive regulations in force in the United Arab Emirates.”
Appointment of Liquidator:
“The Board of Directors decides to appoint Mr./Ms. [Name of Liquidator], [Professional License Number of Liquidator], [Name of Liquidator’s Company], [Address of Liquidator], as the legal liquidator of the company, and grant him/her all necessary powers to carry out the liquidation tasks in accordance with applicable laws and regulations.”
Signatures
The resolution must be signed by the Chairman of the Board of Directors and all Board members present at the meeting.
Signatures of Board Members:
[Name of Chairman] (Chairman)
[Name of Board Member 1]
[Name of Board Member 2]
[Name of Board Member 3]
Date
Make sure to include the date of the meeting at which the decision was made.
Writing a Board Resolution: The Best Practices
- UAE Commercial Companies Law: The board Resolution for Winding up of Company must comply with the provisions of Federal Law No. (32) of 2021 regarding commercial companies (the New Companies Law), which defines the powers and responsibilities of the board of directors, decision-making procedures, and minutes requirements.
- The company’s articles of association: The articles of association (the memorandum of association) are the primary document governing the company’s operations. Its provisions regarding the powers of the board of directors, the quorum for meetings, and the voting majority must be reviewed before drafting any resolution.
- Clear and straightforward language: Avoid vague or complex terms. Resolutions must be easy to understand for all stakeholders, including employees, auditors, and regulatory bodies.
- Define purpose: The resolution must clearly state its purpose and desired outcome.
- Identify stakeholders: If the resolution affects specific parties (individuals, departments, subsidiaries), they must be clearly identified.
- Amounts and figures: If the resolution involves financial amounts, they must be stated in numbers and words to avoid any misunderstandings.
- Dates and deadlines: Any dates or deadlines relevant to the resolution must be clearly stated.
- Minutes of Meetings: Decisions must be recorded as part of the minutes of board meetings. Minutes are important legal documents that prove the validity of decisions.
- Record of Decisions: An organized record of all board decisions must be maintained for easy reference.
- Secure Storage: Minutes and decisions must be stored in a secure and protected location, whether physical or digital, to ensure their preservation and protection from damage or loss.
- Access: Access to these records must be restricted to authorized persons only.
Special resolution for winding up of a company
Liquidation in the UAE is a legal process aimed at ending a company’s existence, settling its liabilities, and distributing the remaining assets to its shareholders. This process requires adherence to a set of legal procedures and controls to ensure a smooth and transparent process. There are two main types of liquidation in the UAE:
- Voluntary liquidation: This occurs when partners or shareholders decide to terminate the company’s operations of their own free will. This type is the most common and typically occurs when the company is no longer able to continue achieving its objectives, or when the shareholders wish to start a new venture.
- Compulsory liquidation: This occurs pursuant to a court order, usually due to the company’s bankruptcy, inability to pay its debts, or serious legal violations.
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Board resolution for voluntary winding up of company
The board Resolution for Winding up of Company goes through the following steps:
- Liquidation Resolution: Partners or shareholders must make a formal decision to liquidate the company. This usually takes place through a general assembly meeting, approved by the required majority, in accordance with the company’s articles of association and UAE Companies Law.
- Appointment of a Liquidator: A legal liquidator (usually a chartered accountant or specialized consulting firm) is appointed to initiate the liquidation process. The liquidator’s role is to manage the entire process, including collecting assets, repaying debts, and distributing the remainder.
- Notice to Creditors: The company must publish a notice of liquidation in at least two local newspapers to inform creditors and give them a grace period to submit their claims. This period varies depending on the type of company and the governing laws.
- Liquidation of Assets and Settlement of Liabilities: The liquidator sells the company’s assets and settles all debts and liabilities, including employee dues and taxes.
- Cancellation of the commercial license: After completing all procedures and paying all obligations, a no-objection certificate is obtained from the relevant government entities (such as the Ministry of Human Resources and Emiratisation, the Federal Tax Authority), and the company’s commercial license is then cancelled from the commercial register.
Board resolution for liquidation of company
Board Resolution for Winding up of Company is an important and crucial step, requiring a thorough understanding of the laws and procedures to ensure its successful completion without legal complications. Therefore, it is always advisable to enlist the help of POA&more’s team, as they are specialized in ensuring compliance with all requirements. It is worth noting that liquidation has significant legal and financial implications, including:
- Loss of the company’s legal personality: Once the liquidation is completed and the company is delisted, it loses its legal existence.
- Cessation of all business activities: The company ceases to engage in any business activities other than those necessary for the liquidation process.
- Liquidation of assets and debts: All of the company’s assets are converted into cash to repay its debts.
- Protecting creditors’ rights: An orderly liquidation process ensures that creditors’ debts are paid according to legal priority.
- Closing company accounts: All of the company’s bank accounts are closed after the liquidation process is completed.
Board resolution for closure of company
When the board Resolution for Winding up of Company operating in the UAE decides to wind up, it requires compliance with a set of specific legal and administrative procedures. This procedure aims to ensure an orderly liquidation of the company and protect the rights of all stakeholders, including employees, creditors, and shareholders. The following outlines the steps for the board Resolution for Winding up of Company:
- Board Resolution: The board Resolution for Winding up of Company must formally adopt a unanimous vote, or by the majority required by the company’s articles of association, approving the liquidation and dissolution of the company.
- Appointment of a liquidator: The board of directors must appoint an approved liquidator (usually an auditor) to oversee the liquidation process. The liquidator will assess the assets and liabilities and repay the debts.
- Notification of Official Authorities: The relevant authorities (such as the Department of Economic Development in the case of mainland companies, or the competent authority in a free zone) must be notified of the liquidation decision.
- Notification of Liquidation: A liquidation announcement is published in two local daily newspapers (usually in Arabic and English) to give creditors a specific period (often 45 days) to claim their dues.
- Settlement of Debts and Claims: The liquidator settles all debts and liabilities owed by the company, including employee entitlements (salaries, end-of-service benefits, and residency cancellation).
- Asset Sale: The company’s assets are sold to repay debts and cover liquidation costs.
- Obtaining Final Approvals: After all liabilities have been settled and all required documents have been submitted, a No Objection Certificate (NOC) is obtained from various government entities (such as the Ministry of Human Resources and Emiratisation, the Federal Authority for Identity and Citizenship, Customs and Ports Security, Dubai Electricity and Water Authority, etc.).
- Cancellation of Trade License: Once all requirements have been met, the company’s trade license is officially cancelled from the commercial register.
What happens to the director when the company goes into liquidation?
When a board Resolution for Winding up of Company is issued, the director’s powers and responsibilities change significantly. Here are the main things that happen:
- Once the resolution for winding up is issued, the director’s executive powers are immediately suspended. They no longer have control over the company, its assets, or the ability to act on its behalf.
- Their management powers are transferred to the liquidator, a person (often a bankruptcy specialist) appointed to oversee the liquidation process.
- Despite losing their management powers, the director still has an important role in assisting the liquidator. They must fully cooperate and provide all information and records relating to the company.
- This includes handing over financial records, statements of assets and liabilities, and information about employees, creditors, and suppliers.
- The director may be required to attend interviews with the liquidator and assist in the sale of assets.
Which shareholder has the right to liquidate the company?
Although shareholders do not have the right to individual liquidation, they do have important rights during the liquidation process, including:
- Approval of the liquidation decision: By voting in the general assembly (in the case of voluntary liquidation).
- Receiving their share of the remaining assets: After all debts are paid, the remaining assets of the company are distributed to shareholders proportionately. (Preferred shareholders typically have priority over common shareholders in the event of liquidation.)
- Review of the liquidator’s reports: Shareholders have the right to view the liquidator’s reports on the progress of the liquidation process.
Benefits of POA&more in liquidating a company in UAE
When it comes to liquidating a company in the UAE upon the issuance of a Board Resolution for Winding up of Company, hiring a specialized company like POA&more poa Dubai offers several significant benefits. Generally speaking, liquidation companies offer the following advantages:
- Debt and Liability Management: Professional liquidators can deal with creditors and settle outstanding debts in an organized and fair manner, while taking into account the legal priorities of creditors.
- Financial Reporting: Accurate and final financial reports are required. Specialized companies ensure that these reports are comprehensive and compliant with accounting and legal standards.
- Comprehensive Process Management: A specialized company handles all procedures from start to finish, including document preparation, obtaining approvals, dealing with government entities, and managing assets and debts. This saves business owners significant time and effort that they can use for other matters or new projects.
- Dealing with Government Entities: These companies have relationships and experience in dealing with various government entities (such as the Department of Economic Development, the Ministry of Human Resources and Emiratisation, the General Directorate of Residency and Foreigners Affairs, and free trade zones), which expedites the process of obtaining the necessary approvals and permits.
- Simplifying complex procedures: The liquidation process can be stressful due to its complexities and requirements. Hiring experts reduces this burden and gives business owners peace of mind.
- Avoiding mistakes: Relying on specialists reduces the likelihood of making mistakes that could cost the company additional time and money or lead to legal issues.
- A specialized company ensures that all necessary clearances are obtained from various authorities (such as the Electricity and Water Authority, Etisalat, the Ministry of Human Resources, etc.) to ensure the complete closure of the company and the absence of any future liabilities for partners or managers.
- Cancellation of trade licenses, residence visas, and other official documents.
- In the case of voluntary liquidation (by decision of the partners), a specialized company can help managers and partners maintain greater control over the process and make decisions that are in the best interests of all parties involved.
Using a specialized company like POA&more for the company liquidation process in the UAE ensures that the process runs smoothly and efficiently, in compliance with local laws, saving time and effort and reducing legal and financial risks for business owners.
