Dubai Court dissolves company with Dhs34m debts

The Dubai Commercial Court has ruled to dissolve and liquidate a land transport company after it was confirmed that the company's capital had been fully depleted, with debts surpassing Dhs33.976 million, nearly 34 million. This decision was based on a report from an accounting expert, which highlighted the company's total inability to sustain its operations.

The case originates from a commercial dispute in which one partner filed a lawsuit seeking the dissolution and liquidation of the company.

The partner claimed that the company had effectively stopped functioning due to significant financial losses and that its liabilities had surpassed the capital outlined in its articles of incorporation, making it incapable of fulfilling its business purposes.

During the legal proceedings, the court engaged an accounting expert to assess the company's actual financial situation. This involved examining its records and documents, evaluating its assets and liabilities, and determining whether the company was still operational.

After completing the analysis, the expert concluded that the company had indeed ceased operations, owned no real estate or movable property, lacked cash reserves, and faced a negative financial standing. It was confirmed that its liabilities outweighed its assets entirely, with accumulated losses eroding all capital.

After reviewing the expert report, the court proceeded to hear the case in open sessions. The plaintiff's representative was present, while the other defendants failed to appear. Consequently, the court delivered a judgment in the presence of those attending, ruling that the company be dissolved and liquidated due to the demonstrated inability to sustain its operations.

Dr Alaa Nasr, the plaintiff's legal representative, explained that the court's decision was grounded in the Commercial Companies Law, which authorizes a company’s dissolution through judicial intervention when losses render continued operations unfeasible.

He further noted that the court also referenced clauses within the company's articles of incorporation, which mandate dissolution in the event of losing all or a significant portion of its assets.

The court ruling outlined the appointment of a liquidator to manage the liquidation process in line with legal requirements. This process involves registering the appointment in the Commercial Register, cataloguing the company's assets, rights, and obligations, securing its records and documents, and notifying creditors to file their claims within the specified legal period. Additionally, the court required the publication of relevant notices in two local daily newspapers, one of which must be in Arabic.

It was further specified that the liquidator must auction off any movable assets, settle the company's debts according to the prescribed legal order, and provide regular updates on the progress of the liquidation. These steps are aimed at preparing for the eventual removal of the company from the Commercial Register once the liquidation is finalised.