A Guide to Doing Business in the United Arab Emirates

V. Termination of a Business

A. Dissolution and Liquidation

Each of the JSC, the LLC, the SPC and the CC must be dissolved in the event of expiration of the company's term without renewal, completion of the company's purpose, adoption of a resolution to dissolve by the extraordinary general assembly or merger, and, for the JSC, this must be expressly stated in the JSC's internal regulations.

If the losses of the JSC or the LLC amount to one-half of the capital, the general assembly or the extraordinary general assembly, respectively, must vote on dissolution. Dissolution of the LLC requires the approval of partners representing three quarters of the capital, while dissolution of the JSC requires the approval of three quarters of the shares represented at the extraordinary general assembly of the shareholders. If the LLC's losses amount to three quarters of the capital, partners owning one quarter of the capital may demand dissolution. The LLC cannot be dissolved by the withdrawal or death of, or by adjudication of distraint, bankruptcy or insolvency against, one of the partners unless the articles of association of the company (the "AOA") provides otherwise.

The SPC must be dissolved upon the withdrawal or death of, or by adjudication of distraint, bankruptcy or insolvency against, one of the general partners who manage the company unless the AOA provides otherwise. If such withdrawal, death, adjudication of distraint, bankruptcy or insolvency applies to all of the general partners of the company, the SPC must be dissolved unless the AOA provides otherwise.

The LPC and the CC must be dissolved upon the withdrawal of a partner if there are only two partners, except that a court may order a partner to continue in the company if the withdrawal is in bad faith or at an inappropriate time. A court may order the dissolution of the LPC and the CC at the request of a partner if there are serious grounds justifying dissolution. Furthermore, the LPC and the CC must be dissolved upon the death of, or by adjudication of distraint, bankruptcy or insolvency against, a partner unless, with respect to death, the AOA provides it is to be continued with the heirs of the deceased partner.

For each of the JSC, the LLC, the LPC and the SPC, the dissolution must be made public by entry in the commercial register at the MOE and by publication in two local Arabic daily newspapers.

B. Insolvency/Bankruptcy

Federal Law No. 18 of 1993 contains the bankruptcy law. Upon declaration of a debtor as bankrupt and appointment of a trustee in bankruptcy, notice is given to all creditors to register their claims.

Local creditors are required to register their claims within 10 days of publication and creditors resident outside the U.A.E. are required to register their claims within one month. The trustee in bankruptcy verifies the documents submitted by the creditors and prepares a schedule of debts and lodges the same with the court. A copy of the schedule along with a statement of the amounts that the trustee intends to accept as debt owed will be sent to every creditor and the bankrupt. The creditors may file objection to the amounts contained in the schedules.

The judge supervising the bankrupt's estate will decide on these objections and prepare a final schedule of debts with the amounts that have been accepted. The judge supervising the bankrupt's estate will designate the manner in which the assets are to be sold. The sale proceeds will be deposited with the court cashier or in a bank account designated by the judge supervising the bankrupt's estate. Fees and expenses incurred towards administration of the bankrupt's estate will be deducted from the sale proceeds. Thereafter, the amounts due to preferred creditors will be paid and the remainder will be distributed to the unsecured creditors in proportion to debts due to them.