When running a business, situations sometimes arise where you must close the company. Many therefore ask whether they can simply abandon a company in the UAE and avoid formal liquidation (winding up). This is because the process can be costly. In this article, we explain what abandoning a company without liquidation means and what consequences it may bring in the UAE.
- Abandoning a UAE company (stopping renewals, activity, leases) does not end its legal existence or release controllers from responsibility.
- UAE Commercial Companies Law requires formal dissolution procedures — notice, resolution, liquidator appointment and register publication.
- Free zones (eg DIFC, DMCC) and mainland follow statutory closure methods; some offshore regimes allow strike‑off.
- Directors and shareholders face continuing liability for debts and obligations even after strike‑off or abandonment.
- Abandonment risks: accumulating fines, frozen bank accounts, visa/immigration problems and restricted government services access.
- Official liquidation protects creditors, clears obligations, resolves visa issues and preserves the UAE’s legal certainty for future business.
Abandoning a company without liquidation
Historically, abandoning companies without liquidation was common in classic offshore jurisdictions that allow a company “strike off”. Its popularity came from its simplicity. In many such places, a company could be struck off by not paying the annual renewal fee on time. The unpaid fines and penalties would also remain unpaid.
If the owners later needed the struck‑off company, it could be restored, subject to conditions. If there was no need to restore it, the company would move to “dissolved” status. This usually happened after several years in continuous strike‑off status.
Because the UAE is often, wrongly, viewed as an offshore centre, many entrepreneurs apply the same approach here. They assume that abandoning a UAE company without formal liquidation will work in the same way. In fact, UAE corporate regulation is very different. This approach can lead to negative consequences.
What does it mean to “abandon” a company in the UAE without liquidation?
To abandon a UAE company without formal liquidation means a deliberate decision to stop maintaining the company and to stop using it for business. In practice, the most common signs include:
- Failure to renew the trade licence and to pay mandatory annual renewal fees and penalties.
- Stopping commercial activity: no deals, no clients, no transactions on bank accounts.
- Not maintaining office premises or ending the lease of a workspace.
- Not responding to official notices and requests from government authorities or banks.
- Ignoring financial reporting requirements and not carrying out an audit, where required.
However, under UAE law these events do not automatically end the legal existence of a company. They also do not release the persons controlling the company from responsibility. In light of this, let us look at some relevant provisions of UAE corporate law.
General provisions of UAE corporate law
You can register a company in the UAE:
- on the mainland (onshore);
- in one of the many free zones (free zone companies);
- as a UAE offshore company (available only in three emirates).
Different legal frameworks apply depending on the place of registration. These rules include how a company may cease business. They also set procedures for liquidation, strike off, and deregistration.
UAE mainland companies
The UAE Commercial Companies Law (Federal Decree‑Law No. 32 of 2021) sets when a company must be formally dissolved. The grounds include:
- Expiry of the term in the memorandum of association or articles, if that term was not extended.
- Achievement of the purposes for which the company was established.
- Loss of all or most assets, making continued existence no longer viable.
- Merger with another company.
- A shareholders’ resolution to cease activity, in line with the memorandum of association.
- A court judgment to dissolve the company.
Therefore, the law expects closure through the prescribed legal process and proper documentation. In particular, it requires:
- Notice to the competent authority and the registrar, stating the ground for dissolution.
- The dissolution resolution to set out the liquidation procedure and name the liquidator.
- Registration of the dissolution in the commercial register and publication of a notice in local newspapers.
Free zone companies
Each free zone sets its own corporate regulations. Here are a few examples.
| Free zone | Regulations on company closure |
|---|---|
|
DIFC, Dubai |
The main law governing company closure is DIFC Law No. 1 of 2019 “Insolvency Law”. This law provides for voluntary and compulsory liquidation (winding up), as well as administration and receivership. The voluntary winding‑up process is detailed. It requires, among other things, a special resolution and filing the relevant notice. |
|
DMCC, Dubai |
Similar provisions apply in the Dubai Multi Commodities Centre (DMCC):
|
Therefore, free zone regulations indicate that a company can cease business only through statutory procedures, such as liquidation, licence cancellation or deregistration. These procedures require active steps by the company’s management. There is no mechanism for automatic cessation of a company’s activities.
That said, some free zones allow a strike‑off procedure, which is traditionally associated with offshore companies (see the section below).
UAE offshore companies
You can register an offshore company in the following emirates:
- Jebel Ali Free Zone (JAFZA), Dubai
- Ras Al Khaimah International Corporate Centre (RAK ICC), Ras Al Khaimah
- Ajman Free Zone (AFZ), Ajman
Regulation is broadly similar to classic offshore jurisdictions, including how these companies are closed.
In particular, the JAFZA Offshore Companies Regulations allow a company to be removed from the register through a “strike‑off”. The Registrar of Companies may apply this to companies that:
- are not carrying on business (“defunct companies”);
- breach the Regulations; or
- fail to pay fees due.
In most cases, the Registrar first issues a notice. The company is asked to remedy the breach within a set period. If there is no response and the breach continues, the Registrar may proceed to strike‑off.
Key points to note:
- After strike‑off, the company is treated as “dissolved”.
- Directors’ and shareholders’ liability continues as if the company had not been dissolved.
- If the strike‑off was for unpaid fees, the company may be restored within two years. Full payment of all fees and penalties is required.
In short, a strike‑off is simpler because it does not require appointing a liquidator. However, the major risk is the continuing exposure of directors and shareholders for the company’s debts and obligations.
Consequences of abandoning a company in the UAE without liquidation
If you simply abandon a company in the UAE without formal liquidation, you must be ready for the following consequences:
| Consequences | Explanation |
|---|---|
|
Liquidation initiated by government authorities |
The competent authorities notify the company to resume activities or provide valid reasons for inactivity. If there is no response within three months, the company’s registration is suspended and the authorities start court liquidation proceedings. |
|
Continuing liability of directors and shareholders |
The liability of the company’s directors and shareholders continues as if the company still existed. This means that after abandoning the company, directors and shareholders may be held liable for non‑performance of contractual and financial obligations to government authorities and other third parties. |
|
Accumulation of fines for non‑renewal of the licence |
Since the renewal of a business licence in the UAE is essential, failure to renew leads to fines that accumulate. The exact fine amounts are set by each emirate or free zone. For example:
|
|
Immigration‑related risks |
If the company sponsored UAE residence visas and such visas were not officially cancelled, they will be treated as active. This may lead to:
|
|
Banking issues |
The bank account of a company that is not officially liquidated may be frozen. Directors and shareholders of an abandoned company may also face difficulties when opening a new bank account in the UAE. |
|
Restricted access to government services |
An abandoned company effectively loses access to key government services. |
|
Continuing status as a controlling person |
In countries with controlled foreign company (CFC) rules, controlling persons have ongoing obligations. If a foreign company is not formally liquidated, its controlling persons are not released from their obligations arising from control of that company. |
Why liquidate a company in the UAE officially?
The UAE aims to keep its image as a transparent and reliable place for international business. This includes clear rules not only for running UAE companies but also for closing them.
Official company liquidation in the UAE may seem long and complex. However, it gives important protections to owners, directors, and third parties. In particular, liquidation:
- protects creditors’ interests by settling all liabilities owed to them;
- allows the company to settle matters with government authorities, reducing the risk of later action against its directors and shareholders;
- removes risks linked to the immigration status of people who hold UAE residence visas sponsored by the company;
- supports the country’s reputation as a state that provides legal certainty.
Conclusion
It may seem easier to abandon a company in the UAE than to complete formal liquidation. However, UAE law provides for several negative consequences, including:
- accumulation of fines;
- continuing liability of directors and shareholders;
- problems with visas, access to bank accounts, and government services.
Therefore, the better approach is to close the business through official liquidation in the UAE. This will settle all obligations to third parties and help you do business in the UAE in the future.
