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Company Liquidation
Company Liquidation is a process in which an LLC company (or branch of a company), a sole establishment, a free zone company, or an establishment closes its operation, and the assets and property of the Company or establishment are shared with the Company’s creditors and shareholders.
When a Company ends its operations, all the assets of the Company are distributed to the Shareholders of the Company after the settlement of dues to the creditor. In company liquidation, all parties involved should be treated equally – that one party does not benefit at the expense of others involved.
Company liquidation may either be:
Voluntary – initiated by the business owners resulting from continuous losses, a bank call on a loan (wherein the bank demands the full payment immediately).
Compulsory – whereby the authorities force the business to stop operating. Authorities may compel a business to liquidate for reasons such as when a company has no longer liquid funds required to maintain daily operations; suppliers/creditors are not getting paid, or the Company commits a serious offense against established laws and regulations.
Common Reasons for Liquidation
- Bankruptcy/Company Losses
- No business for a Year after being incorporated
- Company has not been registered as a public or private entity
Liquidation Audit Report
Liquidation Audit Report is required to designate a liquidator only from an approved firm. A liquidation audit report will itemize all the assets and liabilities of the Company and should exclude any objections from creditors. As the liquidation progresses, all the Company’s assets are converted to cash and distributed to the creditors or assigned to other Company obligations. It is very important that all the pertinent information is available to the liquidator. The liquidation audit helps assure that the information provided is true and complete.
As a Company’s liquidation is finalized, a post liquidation audit may be done to validate that all assets were valued and distributed properly. This post liquidation audit report will help creditors understand what happened and how the funds (if any) they received from the liquidation were computed. This report will reduce the chances that a creditor might question the liquidator’s actions.
Liquidation audits are mandatory before any company terminates its business operation or cancel its license.
Who is Authorized to Perform Liquidation Audit?
Auditing Firms holding official certification from UAE financial authorities are approved for liquidation audit in the mainland and within the Free Zones. Authorities for each Free Zone also approve the Audit Firms to conduct financial and liquidation audits for companies in the respective Free Zones. CGMA, in partnership with Capex Hassan Auditing, is approved by DED and all the Free Zones of UAE to conduct the liquidation audit. The liquidation audit report is submitted to the appropriate authority where the Company is registered as part of the liquidation process. The authority will then officially close the Company and cancel the business license.
In order for an Audit firm to remain approved by the DED and Free Zones authority, the Audit firm must uphold their professional credentials and well informed with International Auditing Standards. Furthermore, they must also be aware with the liquidation process and hire qualified auditors.
Should you require the assistance of an audit firm approved to perform Liquidation Audit for your Company within Free zone areas, or mainland UAE please, give us a call at +971 556451013 or email us at info@cgmaglobal.net . Our qualified and experienced Audit professionals are ready to work with you!