Many registered businesses in the UAE want to cancel their trade license and de-register their company. The reason could be, from wanting to wind up from UAE, or entering a different sector, where their existing license may not be valid or even loss in business. However, whatever is the reason, companies planning to wind up their business or cancelling their trade license must receive their cancellation certificate from the relevant authority.
Also, if you do not renew your trade license, the concerned authority initiates the process of trade license cancellation and deregistration as per the rules of licensing in Dubai. Therefore, any business registered and established in Dubai (UAE) or undergoing the liquidation process has to go through the cancellation steps regarding their licenses legally. The cancellation process is based on the company type.
Here, you will find out how to cancel a trade license in Dubai.
Why is Informing Authorities About Your Cancellation Necessary?
If you have initiated license cancellation, you need to get permission from the government authorities. This can save you from fines or penalties on your license if not renewed on expiry.
Also, it would help if you told all the concerned government entities that you are no longer in the business. You will not be charged with accumulated fines and penalties incurred upon your license if it is not renewed upon expiry.
It is necessary for you to release your liabilities towards partners and creditors and protect your shares and interests if you are in a shareholding company.
Additionally, it is also a wise step to benefit your business reputation if you decide to start your business again in the future.
From Whom to Obtain Clearance for Trade License Cancellation?
As mentioned above, license cancellation depends on the type of your company. For establishments and a sole proprietorship, the process is simple. You only have to apply for cancellation through DED get clearance from below listed government authorities:
- From ministry authorised to undertake revocation of trade license
- Closing of bank account
- Immigration department
- Water and electricity authorities
When You Will Require a Liquidator?
If the legal form of your company is one of the below listed, then you need to appoint a liquidator:
- General Partnership
- Limited Liability Company
- Simple Limited Partnership
- Public Joint Stock Company
- Private Joint Stock Company
Process to Cancel Trade License in Dubai (for all companies)
● Step 1 – Drafting of resolution
Draft the board of resolutions to appoint the liquidator for the license cancellation. Additionally, prepare the cancellation agreement in the notary public.
● Step 2 – Application for trade license cancellation
The entity has to draft an application for trade license cancellation.
● Step 3 – Cancellation
Cancellation of all the employment visas under the trade license and get the essential clearance.
● Stage 4 – Publication
Advertisement of liquidation has to be published in two local newspapers. In addition, confirmation of the Liquidator and Partners is needed that there is no objection from the third party at the time of publication.
● Stage 5 – Clearance
The visa and company formation card will be cancelled, and the company owner will get clearance from all concerned authorities.
What is Freeze Trade License?
Dubai has a Freeze Trade License facility with a defined time (one year to three years). The trade license of a company can be frozen during this time period. This occurs only when the company has no employees left and there is no legal action against the company. However, creditors still have the right to claim against the frozen company.
Shutting a Business in the Dubai Free Zones
There are three types of free zone company closures:
● Summary Winding Up
When there is no liability left for a company, it can settle the liabilities within 6 months and initiate with a statement of solvency.
● Creditor Winding Up
The company passes a resolution for winding up, followed by a meeting with the company’s creditors.
● Bankruptcy
When the company is bankrupt, the Court decides to liquidate the company under the UAE Commercial Transaction Law No.18 of 1993.
Final Thought
Cancellation of license for sole establishment and a civil company is comparatively more straightforward than the license of a limited liability company. It takes approximately 40 to 60 days for a trade license cancellation in the DED (Dubai Economic Department).
If you find the process complicated and taxing, you can always hire business setup consultants specialising in trade license processing. It will save your time and make the process smooth and convenient for you.