The process by which a company liquidates its assets and stops operations is known as net asset liquidation or net asset dissolution. The difference between business companies in Dubai‘s assets and liabilities is known as net assets. However, the income received by the market sale of net assets may differ from the book value. When a company can no longer afford to pay its obligations, it must sell its assets. On the other hand, a voluntary divestiture plan is carried out to enhance operating and financial efficiency.
Types of Asset Liquidation
1. Complete liquidation
A complete liquidation occurs when a company sells all of its assets and shuts down its operations. The business ceases to exist and is no longer a legal entity after the final liquidation. Complete liquidation can take two forms: voluntary liquidation and creditor-initiated liquidation.
2. Partial liquidation
Partially liquidating a firm entails selling off a portion of its assets and reducing the scope of its operations. After partial liquidation, the company continues to operate as a legal entity but on a reduced scale. Partially voluntary liquidation or partially creditor-induced liquidation are two options for partial liquidation.
3. Voluntary liquidation
When a business setup in UAE decides to shut down on its own, it is known as voluntary liquidation. The understanding that the firm is no longer capable of lucrative operations may lead to the decision to liquidate voluntarily. For example, a typewriter manufacturer may have opted to voluntarily liquidate its assets after understanding that the demand for typewriters would soon vanish due to the introduction of personal computers. Voluntary liquidation might take the form of a whole or partial voluntary liquidation.
4. Creditor induced liquidation
When a company’s creditors compel it to halt operations and sell off its assets, this is known as creditor driven liquidation. Creditors who have given money to the company may have lost faith in the company’s capacity to repay the debts. As a result, if a company fails to make regular loan payments, creditors may try to collect the debt by forcing the company to sell its assets. Complete creditor induced liquidation or partial creditor induced liquidation are two different types of creditor driven liquidation.
5. Government induced liquidation
Government-induced liquidation differs from creditor-induced liquidation in that the government does not need to have a financial stake in the business companies in Dubai. Non-market reasons are frequently used to justify government-induced liquidations. Liquidations initiated by the government might be total or partial. Consider the following example:
- Environmental argument: If a lucrative manufacturing company produces a lot of pollution, it may be forced to close down.
- Moral argument: If the government feels an arms and ammunition manufacturing company is immoral, it may be ordered to shut down its activities.
Immersion Group DMCC can help with the liquidation procedure if your firm has to close down for whatever reason. You can also count on them to safeguard your interests in every manner they can. Immersion Group DMCC is one of the most well-known business companies in Dubai. They provide a wide range of comprehensive company formation services aimed at assisting investors and businesses in establishing operations in the UAE swiftly, efficiently, and without difficulty.