Closing a Company Vs Selling a Company in the UAE

Welcome to the module 11 of our course, where we talk about ways how to close, liquidate and wind up your company. Most entrepreneurs, especially in the beginning, live for the struggle of launching their businesses, sometimes forgetting that thinking about exit strategies is very important as well, and should be well-thought in advance.

Once you made a decision on closing your business, you need to think what to do with it: either to close and liquidate a company or to sell it to a potential buyer in the UAE, so here, in this video, we will compare what are pros and cons of each variant, and you will understand what option works better for you. This video will be equally interesting to both young and experienced entrepreneurs.

Ok. So, as we deal with UAE business related matters for quite long, we see how companies are opened and closed, sold and restructured. You should not think of closing or selling a company as something negative. Better think of it as a new cycle of your life and business.

When we sold our first business, we did so because we were initially registered as a flexi-desk in Fujairah, we didn’t have money to open an office, buy furniture, electronics and hire people from the start, we were still employees than, we started small and upon growth and company development decided to move to Dubai and get a real physical office with all attributes.

For those of you, who are currently in the very beginning of their business journey, it may sound shocking, how can you sell or close a company, that was once your dream of better life and future. Reasons why business owners would like to close or sell business may different. And we picked up the most common for your understanding and clarification:

It can be a burnout, when business owner no longer enjoys doing business and wants to move on.

It can be New Opportunities. when life plans change or set off on different paths because new and better opportunities arise on the horizon. New project for example.

It can be Revenue Decline, which is mostly caused by mismanagement or lack of knowledge on how to attract new customers.

It can be Industry change, when old technology is changed by a new one. Do you remember when we used videotape-recorders in 90s, and how fast CD-recorders changed them in 2-3 years? Did you notice how USB-flash drives took over CDs and how Internet based cloud sharing services are taking over USB now? This is what we mean, sometimes industry changes and you need to either change your business in its essence as well, or sell or close the company.

It can be Partner Disputes. It’s sad to admit but sometimes partnerships break and the last agreement between many partners is to split and part ways due to wide range of reasons.

It can be Financial Reasons. One of the most common reasons. Even when the owner has a profitable business, he or she can sometimes make bad decisions which lead to financial difficulties. Company sale or liquidation can often relieve of debt or other financial burdens.

And of course, it can be a Lifestyle Change. Playing the entrepreneurial game can be exhausting. Sometimes after people play it long enough, they decide to take their lives in a new and different direction—change the country of stay, or way of living, downshifting for example.

As you see, the reasons could be many and the decision to close or sell your business can be a difficult one to make. So, what is better to sell or to close? The answer is simple.

Consider the real reason behind your decision to sell or close your business, and make sure it's the right one for you. By the way, when you will be selling your business, this will be the first question of any buyer – why did you decide to sell your company?

If you are unsure what to do, let’s have a closer look at the follow up procedures once you made up your mind.

Ok, what you should take care of when closing down the business?

When closing your business, you need to prepare all corporate documentation for closing the company; close all bank accounts and settle business loans and credit cards; set a particular date and inform all your suppliers, employees, customers, and other parties that you close at that specific date; you need to end lease agreements and give prior notice to your current landlord; you need to sell your business assets; pay all outstanding bills to service providers and disconnect services, collect security deposits where applicable, and - depending on your business nature - that list can be further extended.

When selling your business, you need to decide how much you would like to sell your company for and estimate it’s real market value trying to be objective and think from the potential buyer standpoint; decide on whether you will be selling on your own or will seek for professional assistance of business consultants or lawyers; advertise your sale (be it online ads like Google or Facebook, newspaper ads, word of mouth, notifying you clients and partners who might be interested to buy your company; maybe offering incentives and share of sale); you will need to negotiate the sale on sale price, deposit amount, settlement period, handover process, etc; you will need to prepare the contract and agree upon each article of it; you will need to take care of your employees; deal with legal matters of the sale (like changing the names on the license; reissuance of share certificates, amendments to Memorandum and Articles of Association).

As you see, each way has its own set lists of procedures and specific aspects, and now, once you know all of them, you can decide which of two case scenarios is preferable for your current situation.

The advice here is one, measure thrice and cut once: and once you decided on whether to close it or sell it – follow it without hesitation. Though, it may happen so, that the buyer might refuse to buy your company at the very last minute of sigining the sale contract, be ready for that as well, for such cases you better have more than one buyer, in any event don’t worry – if your sale messed up, you can still close the company and vice versa – if you decided to close the company, but out of a sudden some potential buyer comes out of the blue and brings you the deposit, you can still sell it. The company is yours, and the final decision is yours.

Whooof. Hope you enjoyed it. Thank you for watching this video, hope you found it interesting and useful. In our next video lesson we will talk about the difference between closing down or freezing company’s license and liquidation of company.

If you want to know more about Dubai freezone company formation, feel free to get in touch with our professional consultant team and we would be delighted to assist you and help you to compare Dubai freezone company setup costs and help you to find that free zone, which would suit your business needs the most.

Disclaimer: Business Boutique UAE-Consultants.com is not affiliated with any particular government or legal entity. Business Boutique does not give professional legal advice nor any other professional advice subject to a public office in the government. This article merely sets out a simple and basic idea as to the reasons of Dubai freezone company setup and Dubai free zone company formation cost. Business Boutique in no way holds nor imposes any official governmental or legal authority and the article herein is only to be taken as a guide. All further governmental or legal issues should be addressed to the corresponding authorities.

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