Steps for liquidating limited liability companies

المدونة
-أغسطس 3, 2025
-

global business way | UAE | tarik alamal alalamia

Limited Liability Companies (LLC) are considered one of the most common types in the business world, as they provide flexibility and protection for investors. However, in some cases, company owners may face challenges or obstacles that lead to the necessity of making a decision to liquidate limited liability companies. Liquidation is considered a complex legal process that requires taking precise steps starting with determining assets and debts, then moving to distribute profits to shareholders according to their shares. In this article, we will review the stages and importance of liquidation and how companies can deal with this option to solve legal and financial problems and avoid financial penalties.

What is a Limited Liability Company?

A limited liability company is a type of commercial entity that is established under the umbrella of Saudi law, consisting of two or more shareholders with a maximum of 50 shareholders. It is called “limited liability” because the partners’ responsibility for the company’s debts and obligations does not exceed their percentage of participation in the company.

Characteristics of Limited Liability Companies

Number of partners: The number of partners in limited liability companies ranges from two partners to 50 partners. If the number exceeds 50 partners, the company must be converted to a joint stock company instead of remaining a limited liability company.
Partners’ liability: Partners’ liability is limited to the amount of their shares in the company, and they are rarely required to pay the company’s debts from their personal funds beyond their shares in the capital.
Trade name: The company’s trade name must include the phrase “Limited Liability” or “LLC”, which distinguishes it from other types of companies.
Company management: The company can be managed by one or more managers appointed in the incorporation contract or by a decision issued by the partners, allowing flexibility in how daily business operations are managed.
Transfer of shares: Partners are allowed to transfer their shares to third parties, but this must be done according to the legal conditions specified in the incorporation contract.
Commercial activities: Limited liability companies can practice most commercial activities, except those that require special licensing from relevant authorities.
Legal oversight: The company is obligated to submit legal declarations annually and is subject to oversight by competent government authorities such as the Saudi Ministry of Commerce.

Liquidation of Limited Liability Companies

Liquidation of limited liability companies means the necessary procedures that must be taken after dissolving or terminating the company for certain reasons. These procedures include inventorying the company’s assets, properties, and funds, in addition to inventorying the company’s debts and settling them. It also involves determining whether there are accumulated profits from commercial activity and distributing them to partners according to their shares.

Usually, the decision to liquidate the company is made in the following cases:

Company losses that reach half of the founding capital.
Accumulation of debts on the company.
The company stops practicing its commercial activity.

The liquidation process is carried out under the supervision of a person called the liquidator, who is responsible for liquidating the company’s business and paying its debts, in addition to distributing profits if any exist. The liquidator has legal powers to perform their duties within the legal limits determined by law during the liquidation process.

Types of Limited Liability Company Liquidation

Compulsory liquidation: This is a type of liquidation where a court issues a decision to liquidate the company based on a request from partners due to the accumulation of debts on the company. In this case, the judiciary intervenes to organize the necessary procedures for liquidating the company.
Voluntary liquidation: In this type of liquidation, partners voluntarily pay the company’s debts. After paying the debts, the liquidation process begins without the need for court intervention, where decisions are made by the partners themselves.
Voluntary liquidation by members: In this case, the liquidation decision is made voluntarily by the company’s founders, and coordination is carried out between members based on an official meeting minutes, allowing the completion of regulatory procedures flexibly according to partners’ decisions.

How is an Operating Limited Liability Company Liquidated?

As mentioned earlier, the liquidation process of limited liability companies begins immediately after the decision is issued, whether from the court or voluntarily by the partners. Then the liquidator (or more than one liquidator) is chosen to complete the liquidation procedures according to the legal steps specified in the Saudi system.

Legal Steps for Liquidating Limited Liability Companies

Referring to the incorporation contract or articles of association: Initially, reference is made to the provisions contained in the incorporation contract or the company’s articles of association. If there are texts indicating how to liquidate, they must be adhered to.
Partners’ agreement or court ruling: The liquidation process is implemented either based on an agreement between partners according to the incorporation contract or a subsequent agreement, or pursuant to a court ruling in case of company dissolution by court order.
Appointing the liquidator: The liquidator is appointed by the partners or through a court ruling. In some cases, more than one liquidator may be appointed.
Terminating the manager’s and board’s authority: Once the liquidator is appointed, the authority of the company’s manager and board of directors ends, and their tasks are limited to the work necessary to complete the liquidation process under the liquidator’s supervision.
Making accounting records available: During the liquidation period, partners can only access the company’s documents and records. They must provide all financial and accounting records as well as assets and debts owed by the company.
Publishing the company dissolution decision: External parties must be informed by publishing the company dissolution and liquidation decision through appropriate legal means.
Inventorying assets and debts: The liquidator inventories the company’s funds, assets, and debts, then begins the process of settling these debts. Debt payment is arranged according to priority:
- Preferential debts (such as due taxes).
- Ordinary debts (such as commercial debts).
Insufficient company funds to pay debts: If the company’s funds are insufficient to pay its debts, the remaining debts are distributed among shareholders based on their percentage of shares in the company.
Sufficient company funds to pay debts: If the company’s funds are sufficient to pay debts, reference is made to the provisions for profit and loss distribution in the company’s articles of association.
Closing the commercial register: After completing the liquidation in full, the liquidator must submit a financial report stating the completion of liquidation work. Afterwards, the liquidation is finally recorded and published, and the company’s registration is closed from the commercial register.

Thus, all procedures related to company liquidation are completed, and it is legally closed permanently.

Liquidation of Limited Liability Companies (That Have Not Practiced Their Activity)

All legal steps specific to liquidating operating companies are followed according to the legal provisions stipulated in the Saudi system. In cases where companies are not indebted to third parties, the liquidator distributes the capital or profits and assets among the partners, according to each partner’s percentage in the company.

This is done after verifying the integrity of the company’s accounts and inventorying all available assets and resources. Therefore, there are no debts to be paid first, and the remainder is distributed among partners according to their percentage in the capital or according to what is stipulated in the incorporation contract or the company’s articles of association.

What Documents Are Required to Dissolve a Limited Liability Company?

Partners’ liquidation decision: Partners make a liquidation decision based on their agreed-upon agreement and approval.
Filling out the liquidation form: The company manager or designated official fills out the official liquidation form required by the competent authorities.
Canceling the investment license: If the company is licensed by the Ministry of Investment, the investment license is officially canceled.
Central Bank approval: If the company practices activities subject to Central Bank oversight, liquidation requires its approval.
Submitting a decision publication request: An official request is submitted to the relevant authority including publication of the liquidation decision and stamped by the company liquidator.
Financial statement or manager’s statement: A recent financial statement is provided dated at liquidation, confirming no obligations on the company.
Submitting liquidation completion request: A second request is submitted including publication of liquidation completion according to the approved form.
Certificate from Zakat, Tax and Customs Authority: Stating no outstanding amounts and no objection to company liquidation.
Financial report on liquidation work: Shows no obligations on the company, signed by all partners.
Final account: A final account is prepared showing the final results of liquidation operations and distribution of assets, if any, to partners based on their shares in the company.

Striking Off a Limited Liability Company Register

Whether you are seeking to liquidate a partnership company, joint stock company, or limited liability company, striking off the commercial register is an important legal step for limited liability company owners who want to end their commercial activity in a legal and smooth manner. This process requires following specific procedures to ensure the company is officially terminated according to local laws.

The commercial register striking off process includes a set of steps, including company liquidation (if necessary), debt settlement, and notifying the competent authorities. After completing these steps, a request to strike off the company’s commercial register is submitted, where concerned parties provide the necessary documents to the relevant government authorities.

When the commercial register is struck off, all commercial activities of the company are legally terminated, and the commercial entity becomes officially non-existent in the commercial register. This step prevents any additional legal liability on the company after its striking off, and allows investors and partners to focus on other projects or embark on new commercial activities.

Striking Off the Commercial Register of a Limited Liability Company Branch

To be able to strike off the commercial register or delete a commercial activity for a limited liability company branch, the following steps must be followed:

Ensuring all financial obligations with the Zakat, Tax and Customs Authority are fulfilled.
Submitting a decision from partners to strike off the branch, certified by the Chamber of Commerce.
Submitting a letter from the company manager if they have the authority to strike off according to the articles of association or incorporation contract.
Ensuring no workforce is registered under the branch’s commercial register.
If the commercial register includes any licenses, these licenses must be canceled and official proof of this must be provided.
Signing a declaration of not obtaining any license.

How Can Global Business Path Experts Help Me in the Liquidation and Register Striking Off Process?

Undoubtedly, liquidating limited liability companies represents a defining moment in every entrepreneur’s life, but it is a necessary moment no less important than the moment of starting the company’s activity or establishing it. The liquidation process is subject to strict legal rules, and every entrepreneur must be aware of them and comply with them. This is particularly important if they are about to start a new commercial activity or reassess the company’s position within the liquidation process framework.

You can always rely on Global Business Path experts as a trusted partner if you wish to establish a company in the UAE, liquidate your limited liability company, or strike off its commercial register. We have a team of legal experts who facilitate the liquidation and striking off process for you, helping you prepare the list of necessary documents and guiding you through the required legal steps to complete the process smoothly and safely.