What is a DMCC Company?
DMCC companies are those companies that are registered and licensed within the Dubai Multi Commodities Centre (DMCC), a free zone in Dubai. Business can establish DMCC companies to carry out the activities allowed under the free zone’s rules and regulations. In case the owners want to windup the company, they should go through the relevant liquidation process.
What Is DMCC Company Liquidation?
DMCC company liquidation is the official procedure of closing a DMCC company that includes settling the company’s debts, assets, liabilities and other commitments prior to the closing of the business.
A company cannot merely cease activities and consider itself closed until it completes the DMCC winding-up processes and provides the approval and closure documentation.
The exact procedure may vary to some extent depending on the state of a company’s finances and what type of winding-up is to take place.
When Does a DMCC Company Need to Be Liquidated?
A DMCC business can be dissolved if the owner/s chose to close the company completely.
This could occur because of various reasons, including:
- The business is no longer operating.
- The owners have decided to stop the business.
- The company is no longer commercially viable.
- The owners want to close the company and end its legal and financial obligations.
The relevant winding-up procedure could vary as per the company’s conditions and financial position. Therefore, a company needs to look into the necessary requirements of DMCC before the liquidation process starts.
Types of DMCC Company Winding-Up
DMCC have several different winding-up options depending on the situation of the company.
That could include:
- Summary Winding-up
- Solvent Winding-up
- Insolvent Voluntary Winding-up
- Involuntary Winding-up by the competent court
Summary Winding-up
This applies to companies whose matters can be dealt with within 6 months. The directors will have to make a declaration stating the company’s affairs and ability to complete the winding-up of the company within this period.
Solvent Winding-up
This winding-up is applied when the company’s affairs can be completed finally within 12 months from the commencement of winding-up and the directors have to make the declaration regarding the company affairs.
Insolvent Voluntary Winding-up
It is when the company cannot pay the full amount of its debts. Creditors are involved in this winding-up, and it is dealt with as per the relevant requirements of the DMCC.
Insolvent Winding-up by the Competent Court
This form of voluntary winding-up is initiated by the relevant court instead of the company. DMCC’s guidance states that this can occur in certain circumstances, for example where the company has been struck off or if there has been serious or repeated breaches of the rules.
How Does the DMCC Liquidation Process Work?
There are multiple steps involved in winding up a company to ensure its legal closing. The requirements for winding up may differ according to the type of winding-up and the circumstances of the company.
Pass the Required Winding-up Process
The decision of winding-up is to be made by the company’s owners or directors formally. The written resolution of the meeting has to be passed as per the kind of winding-up and relevant DMCC rules and regulations
Liquidator Appointment (where applicable)
The applicable winding-up process involves appointing a liquidator if necessary. The liquidator helps with the company’s finances, records, claims and other related areas to help the company close.
Submit the winding-up application to DMCC
The company submits its winding-up application to DMCC with the required information, documents and liquidator details, where applicable, through the relevant DMCC process.
Complete the required cancellation and clearances
The company completes applicable visa, permit and other required cancellations. Any necessary clearances should also be obtained before the liquidation process can be completed.
Clear Remaining Liabilities
The company’s pending liabilities and financial commitments are checked and cleared as necessary. These could be employee dues, supplier payments, bank obligations, rent and utility-related amounts.
Complete the 14-Day Notification
DMCC publishes the company’s winding-up notification for a minimum of 14 days. This gives relevant parties an opportunity to raise claims or objections during the process.
Submit the Liquidator Final Report
Once the required matters have been completed, the liquidator prepares the final report and submits it to DMCC as part of completing the company’s winding-up process.
Complete De-registration and License Termination
After the required documents and final report are accepted, the company completes it’s de-registration and license termination with DMCC, formally bringing the company’s operations to an end.
Common Mistakes to Avoid During DMCC Liquidation
Starting the Process without Checking the Requirements
Companies might initiate the liquidation procedure without verifying the winding-up route for their business. This could result in missing documents or delay in the process.
Not Keeping Financial Records Updated
If the company’s accounting records are lacking or out of date, it will be more difficult to identify its assets and liabilities and other financial issues that will need to be dealt with.
Delaying Visa and Other Cancellations
If there is any employee visas, permits or other registrations related to the company that are still valid, these can hold up the closure of the company. These should be cancelled where necessary.
Not Settling Outstanding Liabilities
Not settling unpaid debts, the vendor’s balance or any other liabilities can also cause issues when liquidating. These issues should be explored and resolved during the process.
Are There Penalties During DMCC Liquidation?
Any breach of the applicable DMCC rules or requirements can cause penalties. The level of any penalty can vary depending on the nature of the breach.
Therefore, businesses should complete and file all the filings, clearances and various other requirements on time and be alert to any un-issued sanctions through their DMCC account prior to completing the liquidation process.
How Everest Chartered Accountants LLC Can Help
The process of dissolving a DMCC company includes preparation of accounting records, documents, clearances and all other requirements. Everest Chartered Accountants LLC could assist you with the liquidation process.
Everest can assist with:
- DMCC company liquidation and winding-up
- Accounting records and financial statements
- Liquidation and audit reports
- Required documentation and clearances
- Settlement and review of outstanding financial matters
- De-registration and license termination support
Having good support can help a business stay organized and work through the process step-by-step that little bit more quickly.