What exactly is company liquidation? If you wish to understand company liquidation through a simple definition, it is a process through which registered companies wind up their business. When liquidating, the business sells off its assets and payments are duly released to the creditors. In a majority of the cases, companies that are making significant profits do not go through liquidation. But in some cases, even the most solvent businesses undergo this process.
Now, there are three different types of company liquidation. Let us look into them to understand them better:
Actioned by the Shareholders and Directors of the company, voluntary liquidation has two forms that depend on the solvency of the company. If the company is solvent, it would initiate MVL or Members Voluntary Liquidation. On the other hand, companies that are insolvent need to initiate CVL or Creditors Voluntary Liquidation.
Members Voluntary Liquidation is a formal means of winding up a solvent company. In this case, the company is in the position to pay off all its debts while also ensuring that the tax lodgments are updated. However, in case the company is not able to pay off its debts, then a Creditors Voluntary Liquidation is initiated. What needs to be clarified here is that a CVL is also meant to be initiated by the shareholders of the business.
Also known as a Court Liquidation, an Official Liquidation is initiated when a creditor of the company applies to the court to enforce liquidation on the debtor company. This is a rather length procedure and can incur additional expenses on the creditor. The application is filed in the Court in case the company fails to pay the amount of money demanded in a Statutory Demand.
If there is an urgent case that involves assets that may be at risk, it is possible for an applicant to request the Courts to appoint a Provisional Liquidator so that the assets may be protected. During this particular form of liquidation, it is the responsibility of the liquidator to safeguard the assets, conduct a thorough assessment over the current standing of the business, and then present recommendations to the Court in terms of the best resolution or an appropriate outcome.
If anything, company liquidation in Dubai is a very complex and time-consuming process that is best handled by experts. SZCA is one of the leading chartered accountants firms in Dubai offering complete assistance with company liquidation. Get in touch with us at +971 55 102 8567 right now to acquire further information about our services pertaining to the liquidation of an LLC company in Dubai.