Considering Freezing Your Company in the UAE? Here's What You Need to Know

Running a business in the UAE’s dynamic market is exciting, but unforeseen circumstances can arise. Maybe you’re facing temporary setbacks, or perhaps you’re restructuring your operations. Whatever the reason, if you’re contemplating pausing your business activities, freezing your company in the UAE might be the perfect solution for you.

What Does Freezing a Company involve?

Freezing a company, also known as license suspension, allows you to keep your business license inactive for a specific period. This provides a valuable alternative to company liquidation, especially for those seeking to avoid permanent closure.

The duration of the freeze depends on your company structure:

Sole Establishments: Registered with the Department of Economic Development (DED) can freeze for a maximum of one year.

Other Companies: Enjoy the benefit of freezing for up to three years. This extended window allows ample time to address challenges and determine your future course of action.

Important Considerations During a Freeze:

Zero Business Activity: While your license is frozen, all commercial operations must cease. This includes generating revenue, entering into contracts, or engaging in any business-related activities.
Maintaining Ownership Rights: The good news is that shareholders and company owners retain full ownership rights during the freeze. This means you can explore new ventures or pursue other business interests while your license remains inactive.
Avoiding Fines: Freezing your license effectively halts the accumulation of non-renewal fines, which can be a significant financial burden. Remember, if a license remains inactive for five consecutive years without renewal, it gets automatically cancelled.

Steps Involved in Freezing Your Company

Zest Consultants, your trusted UAE business advisors, recommend following these steps to freeze your company:

Prepare a Justification Letter: On your company letterhead, clearly explain the reasons for freezing your license and provide supporting justifications.
Cancel Employment Visas: If you have sponsored any employees, you’ll need to cancel their visas before proceeding.
Obtain Ministry Approval: Secure a confirmation letter from the Ministry of Human Resources and Emiratisation (MOHRE). This letter verifies the absence of sponsored individuals under your license and confirms no labor restrictions exist.
Submit Application and Fees: The DED, or your relevant licensing authority, will require a completed application form along with the prescribed government fees. These fees typically include a per-year freeze charge and an additional amount based on the duration since your license expired.
Potential Inspection: Be prepared for a DED inspection as part of the application process.

Restarting Your Business After a Freeze

Once you’re ready to resume operations, simply approach your Economic Department and submit a renewal application. Don’t forget to include a valid Ejari-registered lease contract.

Key Takeaways: Company Freeze vs. Liquidation

While both options involve pausing your business, company liquidation represents a permanent closure. Your company ceases to exist, and assets are liquidated to settle any outstanding debts. Freezing, on the other hand, offers a temporary reprieve with the opportunity to revive your business endeavors in the future.

The Benefits of Freezing Your Company

Avoid Liquidation: Preserve your company’s legal existence and prevent the need for a potentially complex liquidation process.
Halt Non-Renewal Fines: Stop the accumulation of costly fines associated with an inactive license.
Retain Ownership Rights: Maintain control over your company during the freeze period.
Restart Business Activities: Resume operations seamlessly once you’re ready to pick things back up.
Avoid New Set-Up Costs: By reactivating your existing license, you bypass the expenses associated with establishing a new company.