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.

Why Outsource Bookkeeping and Accounting Function?

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Every business is different and one business’ proven formula may not fit another’s. It is very important for a Company to maintain its financial discipline, irrespective of the nature or size of the business. Some of the key benefits of outsourcing finance operations are:
  1. Saves time – One of the most common and obvious advantages of outsourcing is the amount of time you save. It’s a simple concept: accounting and payroll take time. If you’re doing it yourself, then that’s time lost. There are a lot of different aspects to consider and it becomes a balancing act. By outsourcing your accounting and payroll services, you simply save time that’s better spent on core tasks.
  2. Reduced Overheads – By outsourcing accounting, a Company saves overheads like visa costs, perks, visa deposits, sick leaves, annual leaves etc.
  3. Faster decision making – Our reports are customizable and helps the management to make informed decisions at the right time, which is crucial for any business to grow exponentially. After all, if you’re paying money to work with the experts, they’ll have the information you need to see in a way that makes sense. This allows you to continue to make decisions to grow your business with peace of mind.
  4. Updated Big Picture – If you’re on the fence about outsourcing one service or another, an important thing to keep in mind is the amount of information and insight you might receive. Good quality accounting and payroll companies will have a “big picture” in mind after dealing with your company for a while. This information can be had at a moment’s notice, and advanced technologies can help you obtain personalized reports giving you the insight you need to further your company.
The types of Outsourced Accounting and Bookkeeping Services we offer are listed below:

Bookkeeping / Outsourced Accountant

A service which helps the Company maintain their set of books in complete order, compliant with local laws and reconciled with various statements. This is a basic feature and  the minimal requirement for any Company, whether it is a startup or a Multi-National entity. Our bookkeeper shall handle day-to-day data entry, either on a full-time deputation basis or through regular visits. Typical kinds of bookkeeping outsourcing could be on a Full time, Part Time or Project Basis.

Management accounting / Outsourced FM

Management accounting entails the management of business assets, internal business operations of clients, reports on profit and loss based on the company budget, reports on the fulfillment of key performance indicators or performance metrics that are uniquely adapted by the company, cash forecasts and revenue projection, among others. In managing this data, your provider must assume an eagle-eye approach with regard to how your company’s leadership realistically fulfills all its financial goals.

Financial controller services / Outsourced CFO

These services cover coordination with bookkeepers and business owners in the completion of monthly management reports. In the fulfillment of these services, your provider will handle financial data that is crucial to hiring, dealing with clients, and the like—an assessment of how healthy your business is at any given time. Financial analysis is a part of this service, which includes data that pertains to product cost calculation; profitability; reviewing of credits and rebills; and reviewing company sales contracts to determine impact on accounting policies, among others.

Payroll services

Another service that is available is the management of your company’s payroll. Our payroll services include the tallying of your company’s pay cycle, the accounting of on-demand services, end-of-month services, and end-of-year services. Your provider is obligated to learn the payroll management norms of your company, as well as what the just and timely standards are for your employees’ compensation, in order to ensure that they adhere to the same.

To know more details, please contact Nihar Kothari, Partner at Affiniax at nihar@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.

WHAT IS THE COST OF OUTSOURCING THE ACCOUNTING AND FINANCE FUNCTION / DEPARTMENT?

Understanding the cost of outsourcing can be confusing. In a field where there are so many options, it is difficult to determine the cost of the accounts and what actually defines this outgoing. Here are six factors that can help you determine the cost of an accountant and why.

1) TRANSACTIONS

On a pure labor cost basis, the number of transactions your business conducts will dictate a portion of the price with an accountancy firm. Quite simply, if your business conducts a few transactions throughout the year, it will cost less than a business that has thousands of transactions.

An important role of an accountant is to account for the business incomings and outgoings on an accrual basis. This shows you, and others, what financial transactions have occurred, how and where?

2) TOTAL REVENUES

Much like the number of transactions, the value of transactions and therefore revenue will have an impact on the cost. Large transactions can often be more complex but more importantly, they carry risk.

It is vital to ensure that if your business is conducting high value transactions, the outsourced accountancy firm has the capability and experience to align with your business. This can come with a price.

3) COMPLEXITY OF BUSINESS

An accountant’s cost is also affected by the complexity of your business. A single office in a single location will have a very different price to the one that is read across several jurisdictions for instance. The makeup of a business complexity can follow a few guidelines:-

  • Entities:
    • How many entities does your company have?
    • Is it a single company dealing only with customers or is it a holding company with many entities serving different functions below?
  • Jurisdictions:
    • Where are the business (es) based?
    • What activities are they carrying out?
    • Is your business based locally, regionally, globally or offshore?
  • Bank Accounts:
    • How many bank accounts are to be served?
    • The number and type of transactions will be monitored.
  • d) Business Model : Various businesses have inherent complications. A single owned proprietorship conducting consultancy services will be much simpler compared to a contracting business having continuous contracting services.
4) INTERNATIONAL ACCOUNTING STANDARDS

An accountant’s cost can also change based on their ability to conform with the International Best Practices. It is important here to align your business to your accountant. An accountancy firm is only as good as its employees and often they would have gained their certifications from abroad first. What is the make-up of the company and to what best practices do they adhere? A big four company will cost you more but has the strength to back and certify your accounts to global standards. Do you need the auditing power of a big four company or will a base level to international mid-tier group perform the task effectively?

5) ANALYTICAL AND MANAGEMENT SUPPORT

If you cannot measure something, how can you improve? It is very important to ensure that your accounting firm can give you the reports you need. These vary from business to business and from C-level to C-level. Everyone wants something different based on what is important to them.

The difference of cost can also change with this factor. Many low to mid-tier firms will not have the ability to customize report for your business. They will use accounting software and will pull out reports in that standard. The more effective firms will tailor it to exactly what you need.

However, the cost of getting the exact figured you need can be outweighed by its significance to your business. Getting improper or ineffective reports can affect your decision-making ability and the future of your business.

6) EXPERIENCE

When choosing an accounting firm in the UAE, you must understand the experience of that company. Aligning your company, its jurisdiction and activity to the skill set of the accountant is vital.

When evaluating the company, you can ask for references or details of the company that have similar stature and activities to yours. Most accountants will give you a list of the big companies that they have worked for or work with, but it is important with alignment to your business – the answer is no. Choose a company with experience in your field, your location(s) and with a proven track record of success.

The cost of experience can be high. For an accountant, landing a multinational can affect its own pricing model. Make sure you align your business with the correct skill set to attain the best results.