Following the publication of our recent article on the voluntary liquidation of solvent limited liability companies (LLCs) in the UAE, an important question was raised by one of the readers: what happens if, during liquidation, it is discovered that the company’s assets are insufficient to discharge all of its debts, and what liability may arise for shareholders or directors in such a case?

Introduction

Voluntary liquidation is the mechanism available to solvent limited liability companies in the United Arab Emirates (“UAE”) where the shareholders decide to bring the company’s operations to an orderly end. Unlike compulsory liquidation, which is triggered by insolvency or court order, voluntary liquidation reflects a decision of the shareholders to dissolve the company while it remains able to discharge its obligations in full.