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Hello,
I plan to close one of my freezone companies in UAE. I contacted FZ and they told me that I could easily dissolve/cancel the company license without liquidation. It is a much more straightforward and affordable option than the liquidation process, but is there any catch?
P.S.: Company made profits in 2020, 2021 and 2022 but now it is almost dormant. It has a small amount of assets(cash), no debts, no employees and a single shareholder.
Dissolving properly is the preferred way, especially if there are multiples parties involved (other shareholders or directors), if the company has liabilities or receivables, or if the company has assets that you will claim personally. Without a proper dissolution, you may run into issues with these types of things. If a bank or tax authority in the future asks you for source of wealth, having an abandoned company as opposed to a company which was cleanly and properly liquidate can be a problem.
If that doesn't concern you and if the company indeed is dormant, has little to no assets, no debts, and no employees, you can quite safely just abandon it.
@Sols
Thanks for your answer. I'm not planning to abandon the company. I'll pay some fees(approx $800) for the license cancellation and the freezone authority will cancel and close the company without liquidation. The company has little cash assets, no debts and no employees.
I don't have tax authority concerns because I live in UAE but can you elaborate the source of wealth part? I work with a private bank sometimes(evey 1-2 year) they ask for source of funds but so far they only asked for company bank statements.
Try to get as much documentation as you can from the cancellation process.
You don't want to be in a position where, for example, your bank (current or new in the future 2-3 years from now) asks for source of wealth, and you can't show why your company sent money to you. You can probably satisfy that by just paying yourself one last dividend of all remaining assets (after all fees have been paid), and then cancel the license. Keep records of everything, and you'll probably be all right.
