LIQUIDATIONS IN THE UNITED ARAB EMIRATES (PART 1)

INTRODUCTION

Liquidation can be defined as the winding up of a Company by selling off its assets to convert them into cash to pay off the firms unsecured creditors. The secured creditors take control of the respective pledged assets on obtaining foreclosure orders. Any remaining amount is distributed among the shareholders in proportion to their shareholdings. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they come due.

Types of Liquidations

There are two types of liquidations in the United Arab Emirates.

  • Voluntary Liquidation

In case of voluntary liquidation, the owners or shareholders of the firm decide that to close and wind up the Company as they do not have enough funds to pay off their creditors and other liabilities.

  • Mandatory Liquidation

In case of mandatory liquidation, the liquidation order is put forward by the courts. It is not in the will of an owner or shareholders to liquidate their company. This usually occurs when a company fails to pay creditors multiple times. Because of this, creditors can file a request for the liquidation of a company.

Here the assets of the Company are distributed to the creditors and contributors based on the priority of their claims.

Roles and Duties of a Liquidator

A liquidator must be appointed in order to liquidate a Company in the UAE.

Below are 7 points which describe the role of a Liquidator.

  • The liquidator appointed by a Company in its liquidation stage shall represent the Company in any litigation that may occur.
  • The assets of the Company are sold by the liquidator in order to settle the debts of the Company.
  • Certain debt is considered as priority and these are settled before other debt. This mainly includes the outstanding employees’ salaries.
  • Once all debt has been settled, the remaining funds are distributed among the shareholders or the owner.
  • In case the funds generated from the sale of the Company’s assets are insufficient to pay off the debts, the deficit will be adjusted against the share capital of the shareholders.
  • The Statement of Affairs and Liquidation Report has to be prepared by the liquidator after conducting the necessary procedures.
  • The liquidator would also be responsible to request for the removal of the Company from the Commercial Register.

Documents required for Liquidation of a Company in the UAE

  • Copy of the license
  • Memorandum of Association
  • Shareholder’s Resolution to liquidate the Company
  • Power of Attorney
  • Passport copies of all shareholders along with Emirates ID’s
  • Application for deregistration
  • Statement of Affairs and Liquidation Report
  • Letter from Labour and Immigration department that there are no visas.

To learn more about liquidation procedures in the United Arab Emirates, read Liquidations in the United Arab Emirates (Part 2)

For more information, Email us at mail@affiniax.com

Accounting Technologies

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Accountants need to stay up to date with technological advances in order to respond to market conditions and their clients’ needs. Technological innovations have led the way, establishing how accounting is done nowadays. Digital resources and online tools help improve productivity and organization.

Now, we can find advanced technology to help streamline accounting processes and management of books of accounts.

How does technology impact accounting?

The biggest impact IT has made on accounting is enabling companies to develop and use computerized systems to track and record financial transactions. This system allows companies to create individual reports quickly and easily, enabling management to make decisions faster, using up-to-date information.

There are many applications of modern technology in accounting. Out of the many available options, in this blog we summarize the five types of accounting technologies that are currently transforming the accounting industry:

  1. Artificial Intelligence & Robotics

    In simple terms, Artificial intelligence (AI) is the ability of a computer or a robot controlled by a computer to do tasks that are usually done by humans because they require human intelligence and discernment.

  2. Cloud Computing

    Cloud computing accounting software is accounting software that is hosted on remote servers. It provides accounting capabilities to businesses in a fashion similar to the SaaS (Software as a Service) business model. Data is sent into “the cloud“, where it is processed and returned to the user.

    A Simple Advantage
    This opens up a new way for accountants to work with their clients. Using cloud accounting, there is more time to engage with the client and focus on business strategy instead of getting burdened with detailed processes.

    Difference between Traditional Accounting and Cloud Computing?
    Traditional Accounting Software comes with initial infrastructure costs as well as maintenance costs of on-site software and hardware.

    Cloud computing, on the other hand, provides a software function without large upfront costs or licensing fees.

  3. Innovations in Tax Software

    An innovation is defined as the process of translating an idea or invention into a good or service that creates value or for which customers will pay. To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need.

    Tax preparation software is an online, automated system for preparing individual and business income taxes. It’s used by both tax preparation businesses, like CPA’s(Certified Public Accountant), and individual taxpayers who prefer to do their own returns. It eliminates the need for the taxpayer to complete his or her return using actual forms.

    The tax software of today has helped improve accuracy while reducing margins of error – something businesses want to embrace in order to avoid tax penalties and prevent issues with stakeholders. Better tax software also helps streamline audits by making them more efficient and effective.

  4. Mobile Accounting

    Mobile accounting is the ability to access and process accounting information, which could be data, applications, etc. over devices that are not restricted by physical locations.

    Mobile accounting could mean different things to different people and businesses, so the first step in a successful rollout is defining what it means to you and your company. For example, consider who the users will be and what they will be using it for. Think about the different functions you’d want your mobile accounting and financial solution to cover.”

  5. Social Media

    Social media has become an essential tool for firms wanting to engage with current and potential clients while expanding their brand reach. Social media is a tool that will continue to evolve and provide accountants with a valuable sales and marketing platform that can instantly connect firms to current and future clients.

    Most accounting firms understand the importance of implementing traditional marketing into their overall business development plans, but many firms may not realize the power of integrating social media marketing into their long-term marketing strategies.

    Social media should be a part of a firm’s overall business development strategy, and if done consistently, will help amplify the effectiveness of all other marketing and business development efforts.

Economic Substance Regulations – Deadlines Announced so far

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The UAE Economic Substance Regulations (ES Regulations) require all UAE entities that fall within the scope of the regulations by carrying on a “relevant activity” as defined by the ES Regulations to comply with annual reporting obligations.

Due to the current pandemic and subsequent lockdown, several Free Zone Regulatory Authorities have extended the last date for making filings in compliance with the ES Regulations. The Free Zone Regulatory authorities that have extended the filing dates are as follows:

  • Abu Dhabi Global Market (ADGM): The 31st March 2020 notification deadline is no longer applicable and the new deadline is 30th June, 2020. Guidance on the filing process is available on the ADGM website.
  • Dubai Airport Freezone Authority (DAFZA): The notification deadline of 3rd May 2020 was extended to 31st May, 2020. Guidance on the filing process has been shared with DAFZA licensees via email.
  • Dubai International Financial Centre (DIFC): The 31st March 2020 notification deadline is no longer applicable and the new deadline is 12th June, 2020. Guidance on the filing process is available on the DIFC website.
  • Dubai Multi Commodities Centre (DMCC): The notification deadline is 30th June 2020. Guidance on the filing process is available on the DMCC website.
  • Dubai Silicon Oasis Authority (DSOA): The notification deadline was 31st March 2020. Guidance on the filing process has been shared with DSOA licensees via email.
  • Ras Al Khaimah International Corporate Centre (RAKICC): The notification deadline is 30th June 2020. Guidance on the filing process has been shared with RAKICC licensees via email.
  • Hamriyah Free Zone Authority (HFZA): Entities that are governed by the Regulations will need to submit a notification by 30th June 2020, and where required prepare and submit to HFZA an economic substance declaration within 12 months from the end of their financial year (e.g. 31 December 2020 for entities with a financial year ending 31 December 2019.)
  • Sharjah International Airport Free Zone (SAIF): Entities incorporated under the jurisdiction of the SAIF ZONE Authority will need to submit a notification by 30 June 2020.
  • Ajman Free Zone (AJMAN FZ): All entities/licensees, including those who do not undertake relevant activity are required to file by 30th June, 2020.
  • Dubai World Trade Centre: Only entities/licensees that are carrying out relevant activity are required to file by 30th June, 2020.
  • Securities & Commodities Authority (SCA): Investment Management Firms, Management Company Firms regulated by SCA were emailed requesting submission of the notification form by 31st March, 2020.
  • Dubai Aviation City Corporation: All entities/licensees, including those who do not undertake relevant activity are required to file the notification by 7th June, 2020.
  • Dubai Healthcare City (DHCC): Only entities/licensees that are carrying out relevant activity are required to file by 6th June, 2020.
  • Ministry of Economy (DED): Only entities/licensees that are carrying out relevant activities are required to file by 30th June, 2020.
  • Jebel Ali Free Zone Authority (JAFZA): Entities carrying out relevant activities must file by the 30th of June, 2020.

In case you have any questions regarding your organisation’s reporting obligations or the deadline for your organisation, please contact us at mail@affiniax.com.

9 KEY POINTS TO BECOMING A PROACTIVE ACCOUNTANT

As a business owner we often feel if we had that something extra, something better and something clearer to take an informed decision. And that ‘SOMETHING’ often depends on the proactive approach from your Accountant. As a business owner and as a Chartered Accountant, I understand the limitations that we come across at both ends.

Our profession advocates a constant training to be provided not only for technical aspects but also for strong interpersonal skills, organisational competence and intellectual ability. So what are these characteristics? What makes someone stand out?

Here are 9 points that I think is important to understand the responsibility of a Proactive Accountant:

1. Stay updated all the time

Accountants must constantly stay up to date with the profession. Attending refreshers, going to conferences/ seminars and in house training is a must. Technological advancements are also evolving at a furious pace, so these also must be kept up with. Continual personal development is a must, not an option!


2. Story behind the numbers : The Bigger Picture

Providing a data generated report is easy. Staying on top of all the figures and paperwork is more important. At the very least, they need to understand where these numbers are coming from and what does it mean for the business. Good accountants will have a much shorter list of targeted questions that are developed specifically to aid their understanding which allows them to focus on the big picture.


3. Importance of Time

Every business needs management reports at regular intervals if not at real time. If these reports come after 2 months, it is like a post mortem report – you can read through it but cannot change anything.


4. Inter-dependability and Accountability at each level

It is important to make every effort to do the right thing. Every process in an organisation is linked to Accounts Department somehow. Accountants need to have exceptionally well people skills as they typically work in coordination with different departments within an organisation. They have the opportunity to work with different types of professionals and personalities. Therefore, they are required to be
generous with what they know; sensitive to other’s needs and be supportive of their team’s goals. We all succeed when we work together as a Team.


5. Decision making, critical reasoning & analytical ability

Business owners want their accountants to be strong and helpful in decision making, however decision making can be hard. There is always a tendency to put off decisions by procrastinating and concluding that you need more information, only to later conclude that you need even more information. A good accountant should always determine what is relevant and what is not.


6. Trust factor

The information that accountants work with is highly confidential in nature. This is why trust and professionalism are important traits that they must always abide by. Not only is this the right and ethical way to go about their businesses but having a reputation for trustworthiness will win plaudits in the long run. I firmly believe that we trade on our knowledge and ability, but we only get these opportunities through
demonstrating our commitment to client confidentiality.


7. Solutions seeker, not fault finders

Great leaders have the desire to help others succeed. Don’t find faults in the system, find a solution that helps the organisation to overcome an obstacle. Leadership characteristics can be taught but leadership must be exhibited day in and day out.


8. Commitment

Companies are looking for motivated, dedicated individuals for long-term employment. There is no short-term solution, neither for business owners nor for an Accountant.


9. Enjoy what you do

This last one might appear strange, but I firmly believe that we all need to enjoy what we are doing. There is no fun in 9-6 job unless you have a good working environment, surrounded by people who are happy and joyful. Work takes up so much of our time and it is in my opinion that mere monetary rewards will not keep someone in a career they do not enjoy. Whilst no one should expect to be smiling all day, every day it is important we have some fun along the way.

The characteristics of a proactive accountant starts with the basics of sound technical ability and solid ethical foundation. These are considered as a baseline and the Accountant needs to grow beyond the “rules and regulations” mind-set of our profession. Attaining and maintaining the characteristics mentioned above require a personal commitment but are crucial to the accountant’s long-term success. Have you got what is takes to be a good accountant?

HOW MUCH DOES AN ACCOUNTANT COST IN DUBAI?

The recent changes in the business world in the UAE, particularly the introduction in VAT, has seen significantly increased demand for accountancy services. Until recently, many small and medium businesses may not have had their financial statements professionally compiled or audited whereas newer regulations have made this a necessity rather than something that was done for a secondary purpose (applying for financing for example).

This has, in turn lead to many more business owners and senior managers needing to ask how much these services will cost, and, as is often the case, there isn’t a simple answer.

Rather than try and pick an arbitrary number out of thin air, this article aims to highlight the factors that will impact the cost of accounting and bookkeeping services to help you when making the decision that fits your organisation.

The Scope of Work:
Perhaps the most obvious consideration relates to what type of accountancy you need to be taken care of. This might be registering your company with the FTA for VAT or filing a VAT return. It could be a far broader requirement such as accounting consultancy or even full time bookkeeping. This might be an in house dedicated service or, as is often more appropriate and financially viable, outsource bookkeeping. To make sure you get the quality of service you require, have a look at testimonials and client comments and consider who your competitors and clients are using for their accounting needs. Most importantly, check that the potential accounting service you are considering is experienced and qualified to handle the type of service you will be paying for.

The Scale of Work:
It goes without saying that handling the books of a multinational corporation is going to have a different cost associated than looking after the accounts of a sole proprietor. Also consider the complexity of the industry you are involved in. Large scale construction with multiple sub-contractors and projects spanning multiple financial years are going to have complicated requirements. They may have phased payments agreements and trigger milestones that will require extensive if not specific specialist skills and experience compared to a retail outlet for example. One may require a full time team of accountants whereas the other may need part time assistance for which the costs are going to be relative.

Sheer Numbers:
Should the gross turnover alone be a factor in determining the cost of accountancy services? This is an interesting question on the surface. It may appear that the amount of chargeable work is the same for an organisation turning over $100 million with 100 transactions compared to another turning over $1 million from 100 transactions. In reality, this is not usually the case and higher gross numbers, more often than not, will demand a higher fee. There will be different levels of responsibility and risk involved and making sure your chosen accounting professionals have the relevant experience and confidence with high value transactions is going to be vital for your own peace of mind.

Employee or Outsource:
This is one area where you are likely to see significant variation in costs. Having an in-house accountant will incur a salary relative to the experience and skills of the employee. Add to that visa costs, medical insurance and holiday cover and you will have a fixed and determined cost. Outsourcing, provided you have selected the right partner, is likely to represent a lower overall cost almost by default. Consider also that you may well have a team working on your accounts with broader skillsets and combined experience. You could well be getting considerably more bang for your buck if paying for the time they are dedicated to your books rather than for a full working day, week, month or year.

So How Much?
When push comes to shove, you are going to get broadly what you pay for and cheap is rarely the best and the best is rarely cheap. The important thing to ensure is that you are getting great value and the best service for the cost.

Why not speak to the team at Affinax and let them guide you on what services they can provide and how much value they can deliver for you.

5 THINGS YOU MUST CONSIDER WHEN SETTING UP A BUSINESS IN DUBAI

Forming the business model

It is imperative to understand the model of your business before taking the plunge into entrepreneurship. Often companies have been formed where the owner has a great idea but forget that an elegant solution doesn’t automatically translate into a successful business. Companies require an appropriate and effective business model, with the right pricing, communications and delivery channel to the right segment of customers to keep the business thriving.

It starts with validating a business opportunity, defining a large customer segment willing to pay money to solve a real problem, in much the same way as a proof of concept or prototype validates a technical solution.

Here are 5 points to understand when building your business model:

  • Ensure your product pricing matches your target segment
  • Ensure that your product offers a feasible solution to consumers’ problems.
  • Pitch your solution to group of customers including all pricing details
  • Talk to industry experts
  • Plan a local rollout or pilot
Let your business model dictate your jurisdiction

An important part of your business model is the activity of the business. In the UAE, different jurisdictions allow or restrict certain types of activities. For instance, an MEP company cannot operate in a Free-Zone. These typically import products and store them in warehouses and factories, most of which are only allowed in LLC mainland areas.

When you have decided on the business activity, the next step is to determine the location, i.e, the place of operations. With all of the regulations around this area it is important to seek advice from trusted company formation or business advisory companies.

Start-up Capital

When starting up it is a difficult decision whether to fund the business yourself or to use an investor to help with the start-up capital. Whilst having 100% of the business is compelling, it is important to understand the costs when initiating a new business. It is equally important to understand the costs when initiating a new business. It is equally important, that with the investor model, that all bases are covered in your financial model.

Common costs to a business are:

Often business overlook costs which may seem small at first, but can mount up. For instance:

  • Marketing budget – How much are you going to invest in brand awareness and lead generations? Who or what is going to deliver the results you want?
  • Staff secondary costs – Visas, medical expenses, Cars, parking, etc all add up. Ensure you understand the full costs of each staff member. Also ensure you speak to the right company to ensure your visa allowances and commitments are clear.
  • Information Technology (IT) – Whilst quantifying the IT hardware cost is relatively simple, the software required can seem a hidden factor. The small charges can add up to a much larger fee and can leave you overwhelmed if you are not prepared. Think about the different required software, who needs them and for whom are they a ‘nice to have’ rather than a necessity.
  • Office rental secondary charges – Firstly think of the rental solution you require, would a rented office space suffice or is your team going to be starting in a way that requires your own office? Remember that any space that is taken and designed requires approvals from Government bodies before action can be taken.
  • Communication / Utilities – From the mobile phones of your staffs to the office phones on the desk, the associated bills needs to be accounted for. With respect to utilities, enquire about average electricity and water charges from neighbors to allow you to get an idea about the cost, with rented office space these are often accounted for and again provide a viable option.
  • Consumables – Water, coffee, tea, sugar, printing cartridges…these all add up. Make sure to keep them as part of your costs.
Corporate Governance

When starting your own business it is vital that you have the correct agreements and processes in place. From the start, you must ensure that as a bare minimum you have the SOPs (standard operating procedures) documented. These are the rules which allow you to define the rules and policies and functions required to operate your business.

If you enter the business world as a partner/co-founder you must ensure that shareholder agreements are created correctly. Not only must the business display its shareholder shares, but the functions that are delegated to them to earn that share, from investors to shareholders performing a set of key functions that dictate their worth.

Also the contracts that stand between you and your customers, are they required and to what depth must they be created.

Whilst, at the start, all parties are excited about the business, things can change that can change the relationships between parties. Ensure that all bases are covered and that clear policies and guidelines are drafted to handle even the worst case scenarios.

Corporate Governance should be of paramount importance when forming a company. It is advisable, again, to seek the advice of a trusted business advisor when forming the company. You may not know of the potential hurdles you may face down the road.

Accounting

Accounting is one of the tasks that need to be satisfied early. For many start-ups this can seem an overwhelming and confusing task.

Who will do it? What is important to record and what tool shall be used?

The importance of accounting can have huge ramifications to a business throughout its lifetime. It is important to ensure the right steps are followed from the beginning so that you know financially where your business is, throughout.

Effective accounting will define your budget throughout the year. However, a budget is often malleable, as businesses change based on many factors. An accounting role must be implemented regularly to track your performance against budget and the ramifications of different actions.

Accounting will also play a part in your cash flows. With cash flow being the vital killer of many businesses , it is important that it is implement correctly.

Conclusion

With the many things to consider when setting up a business in Dubai, your choices of who will fulfill, what roles which can lead to success or failure are very crucial. You are in the market to play out your business idea. Wherever you can, use trusted resources to complete tasks that may not be in your skill set or time allowance.