Compulsory liquidation in Dubai

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Compulsory liquidation in Dubai

• Hhs lawyers and legal consultants

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• Compulsory liquidation or winding up is a
  court-based procedure under which the assets of a
  company are realized and distributed to the
  companys creditors. This procedure usually
  forced upon the company, rather than the
  directors complying with their duty to wind up
  the insolvent company in a formal manner. The
  winding up petition is usually made by a
  creditor, but a company director or shareholder
  can also issue a winding up petition to close the
  company down. The most common reason for a
  compulsory liquidation is when a company is
  insolvent.

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Process of compulsory liquidation

• Filing a winding up petition
• The first step of the compulsory liquidation
  process is to file a winding up petition in the
  competent court
• Winding up order by the court
• Once the court is satisfied that the company
  should be liquidated, they will issue a winding
  up order.
• Appointing a liquidator
• The official liquidator will take over control of
  the company, meaning the existing directors will
  cease to have any influence over the day to day
  running of the business.

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• Company assets are sold
• The process of liquidating the company assets
  which may include all movable and immovable
  property of the company. The assets will be
  managed by the liquidator in order to repay the
  companys debts.
• Dissolution of the company
• Following the sale of assets, the company will be
  officially shutdown and its name removed from the
  register of companies.

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Outcomes of compulsory liquidation 

• Compulsory liquidation for creditors
• An unsecured creditor may receive all the
  outstanding debts at the end of liquidation of
  process of the company.
• A creditor has to provide the liquidator with
  details of the claim (proof of debts). The
  liquidator will then assess all the proofs of
  debt. He may either accept a claim in whole or
  part or reject it.
• Compulsory liquidation of employees
• All workers of a company are automatically
  dismissed if a winding-up order is created. A
  former employee, may be entitled to a gratuity
  benefit as per UAE employment law.

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• Compulsory liquidation for directors
• When a company goes into compulsory liquidation,
  the powers of its directors cease and they are
  automatically dismissed from office.
• As a former director of a company that is being
  wound up, you may be required to assist the
  liquidator and to provide a statement of the
  companys assets and liabilities

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• Risks involved
• The risks of compulsory liquidation depend on how
  the administrators have run the company so there
  can be various issues that are exposed as a
  result of this method. If the directors are found
  to be guilty of wrongful or fraudulent trading
  and mismanagement of the insolvent company, they
  can further face consequence as mentioned below
  (but not limited)
• Being made personally liable for company debts.
• Disqualification as a director and of all future
  appointments as a director.
• A fine.
• Relief claimed
• Most common reliefs claimed by the company under
  compulsory liquidation are as follows
• Paying the debts
• When the company is in a situation to pay the
  debts of the creditors.
• Enter into a mutual agreement.
• The company can enter into a mutual agreement
  with creditors for voluntary winding up of the
  company.

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