Liquidation of a company is a process of legal insolvency that concludes the firm’s operations. An organization that goes through liquidation sells its assets to pay off its liabilities, debts, and commitments. Often known as ‘winding down’, the business license of a company is canceled upon liquidation. This is because its name is deleted from the Trade Registry, and the firm is considered to have ended.

There can be diverse reasons for liquidation, the major ones are:

• The expiry of license/ duration stated in the articles of incorporation/ association or the accomplishment of the objective for which the entity was set up
• The loss of all or a major portion of the entity’s assets
• Mergers
• Shareholders’ approval that the entity’s term of existence can be brought to an end as per the stipulated majority, etc.

There are two types of company liquidation methods under UAE law:

• Liquidation voluntarily: Corporations may wind up voluntarily for a variety of reasons, including the expiration of a defined period, achieving the firm’s mission, abandoning the firm’s goals, merging with another company, ongoing commercial setbacks, or not being able to meet their obligations.
• Compulsory winding up or legal liquidation: This refers to the necessity of winding up a company when it has committed a significant violation of the law or has become incapable of carrying on its business. It also takes effect when customers submit complaints to government agencies to recover their assets. As a result, the local government takes steps to dissolve the enterprise forcibly.