Questions & Answers
Filing for bankruptcy or liquidation in case of business failure
I am a partner of a small civil company with a professional license issued by DED.
My company has lost court cases wherein we have to pay 400,500 AED. These cases are in the execution stage.
My company also has debts of 364,000 on our books. The company is not in a position to pay the proven debts in execution court or the pending debts mentioned in our books. I want to close the civil company.
Question 1: Is it better for me to file for bankruptcy or file for liquidation of the company?
(Or will the court immediately start one procedure if I register the other procedure?)
Question 2: I heard that the court starts criminal proceedings automatically if bankruptcy proceedings are started. Is this true? What rules to follow to avoid criminal charges?
Question 3: After the civil company is declared bankrupt, will the partners still have to pay the creditors (In the ratio of the shares they held in the civil company) because our company is not an LLC.
Thank you for your help!
Hi,
You have the liquidation option and can be implemented either judicially by a request of one partner or mutually agreed by the shareholders.
The second method is easier and will lead to the appointment of a certified liquidator who shall take over the company operations till closure.
We need to review the company documents to advise further.
Kindly contact us via phone or email.
Hello,
As per your query, even in bankruptcy, if the debt is not settled and the company assets are not sufficient to close the debt, the board of directors and the partners are still liable.
There can be both insolvency and liquidation proceedings to be filed by placing the application to the court to appoint a liquidator and to declare the partners as insolvent.
The timeline of the proceedings is also important. This is a very generic solution, we need to check the entire scenario.
Please contact us via phone or email for further assistance!
Dear Questioner,
Answer for Q1: Liquidation through the agreement of all partners is the best option.
Q2: Not necessarily, depends on the situation and whether the partners or board members have misused the funds.
Q3: We do not recommend bankruptcy, we prefer liquidation and yes they could be still liable with their personal money.
