BMS Auditing offers comprehensive company liquidation services in Saudi Arabia, ensuring a seamless and compliant dissolution process. Our experienced team manages asset liquidation, debt settlement, and regulatory compliance to facilitate an orderly business closure.
Company Liquidation refers to the liquidation of companies, which technically is a formal legal process toward the closure of a business but during which there is a selling-off of assets toward the satisfaction of claimants' interests.
The liquidator, a legal body appointed to handle the liquidation, collects assets, pays the company's liabilities, and, if any, distributes the balance of surplus available to the partners in accordance with their rights stipulated in the association articles.
What is company liquidation?
A company goes into liquidation when it is unable to meet its financial obligations, and the assets are sold off to pay creditors. Liquidation generally occurs due to bankruptcy, poor financial performance, or may be a result of restructuring efforts or the departure of significant investors.
Voluntary liquidation happens when the company decides to liquidate based on reasons such as financial loss, restructuring, or a change in business direction. The owners can decide to dissolve the company, or they may restructure the company or move it.
Whereas Mandatory liquidation occurs when there are extreme legal violations, insolvency, or other serious breaches of law, it happens by law when the company's assets are incapable of satisfying its debts. This is also called bankruptcy and often occurs when the company is insolvent based on bankruptcy laws. Therefore, there is a difference between company liquidation and dissolution.
Liquidation and dissolution are two different procedures. Liquidation is the sale of the assets of the company to pay creditors, while deregistration of the company is what is termed dissolution.
Liquidating a limited liability company in Saudi Arabia offers certain benefits if the company is burdened with unmanageable debt, but it should always be considered a last resort. Understanding the liquidation process before setting up your company in KSA is crucial.
Although liquidation appears to be the last resort for a company when it cannot meet its obligations, it is still a structured legal resolution for an insolvent business. Once the liquidation is done, any pending legal action against the company is automatically halted, and pressure is removed from the company.
Normally, the liquidation cost is satisfied by selling a company's assets, which will be cheaper compared to the entire debt amount; hence, liquidation can be managed in an economic manner. Furthermore, this reduces the obligation of directors concerning creditors; however, those with personal guarantees can still hold it against the company.
Liquidation Process of Company in KSA
The liquidation process requires compliance with various regulatory frameworks. Key steps, such as settling debts and notifying stakeholders, are critical. In Saudi Arabia, Business Link's team ensures that creditors are fairly compensated while adhering to all regulatory requirements.
- Board of Directors meeting to appoint a legal liquidator.
- Filing the liquidation application and preparing company records, settling debts, and taxes.
- Newspaper advertisement of the decision to dissolve, with a provision for the creditors to present their claims.
- Observe whether or not there are any complaints about the company.
- Closing of the bank accounts.
- Final submission of the tax and deregistration of tax.
- Cancellation of visas.
- Liquidator's audit report.
- Liquidation certificate.
Cost associated with the liquidation of the company
The cost of preparing a Statement of Affairs is generally low. Other costs of liquidation are normally offset by the proceeds from the sale of assets in the liquidation process.
For free consultation on the liquidation of companies, contact our team of liquidators.
