Idle Dubai DIFC company let go, what will produce serious consequences

After completing the phased Middle East business layout, many Chinese enterprises put the idle Dubai DIFC company on hold directly, neither operating nor going through the cancellation procedures, mistakenly believing that "offshore companies will not have any impact". In fact, DIFC, as a strictly regulated international financial hub, has clear mandatory requirements for the compliance of the subject, and laissez-faire will trigger a series of chain of serious consequences, not only resulting in high overdue fines, but also implicating shareholders in the subsequent Middle East business layout, and even affecting the cross-border compliance credit of domestic subjects.

1. various compliance fees and penalties continue to accumulate, debt unlimited rollover

even if the company has no operating flow and zero income and expenditure throughout the entire process, the annual hard compliance obligation will not be exempted, and high fines will be incurred if it is overdue, with monthly superimposed interest:

1, license annual review and annual fee fines: each year must complete the commercial license renewal, annual declaration, UBO final beneficiary filing, overdue will result in fines, the longer the delay, the higher the fine;

2. Audit and tax overdue penalties: DIFC enterprises need to prepare financial statements every year, meet the standards of enterprises to issue audit reports, at the same time to the UAE tax bureau to complete the enterprise income tax, consumption tax zero declaration. The fine for late declaration for the first time is 1000 dirhams, which is doubled for the second time. If you refuse to declare for a long time, the accumulated fine can reach up to tens of thousands of dirhams;

3. Arrears of address and secretary trusteeship: DIFC requires the entity's office address to be entrusted by a licensed legal secretary. The annual fee will be continuously charged during the shelving period, and the arrears will be continuously recovered by the park;

4. All fines and arrears will be permanently posted in the company's name and cannot be cleared automatically. If you want to restore the company or cancel the company later, you must pay all the arrears and late fees at one time. The overall cost far exceeds the scheduled maintenance cost.

2. company is forcibly revoked and delisted, officials start court liquidation proceedings

if the company refuses to comply with its compliance obligations for many years, the DIFC Registry will dispose of the company in stages: first, mark the company as an abnormal operation and freeze the use of the license; If there is no response for more than 3 months, the business license will be suspended directly. The registration qualification will be completely revoked in half a year to one year and removed from the commercial registration list.

Different from voluntary cancellation, the official compulsory delisting has great disadvantages: the park will start the court compulsory liquidation to check the company's past accounts, creditor's rights and debts; Once the problems of tax arrears and arrears are found, they will not disappear with the revocation, and the directors and shareholders will be directly held accountable. The revoked company cannot recover normally. If it needs to lay out the Middle East again, it can only re-register a new subject.

3. directors and shareholders bear unlimited personal joint and several liability, and assets can be recovered.

the UAE Company Law clearly stipulates that the company is abandoned without going through the formal liquidation process, the independent limited liability protection of the company's legal person is invalid, and all violations during the tenure of directors are subject to personal consequences.

The Inland Revenue Department may penetrate the main body of the enterprise and freeze the director's personal UAE local bank account to offset the tax arrears, and if there are employee salary arrears, partner accounts payable, various service fee debts during the duration, the creditor may file a lawsuit in the UAE court to enforce the director's name deposits and fixed assets for debt repayment. Even if the subsequent resignation of the director position, the legal liability arising from the term of office is still retroactive for life and cannot be exempted.

4. included in the Gulf States blacklist, encountered entry and exit ban

data exchange between UAE immigration system and FTZ commercial system, directors and major shareholders of illegal abandoned companies will be included in UAE immigration blacklist:

if you are in Dubai, you will receive an exit ban and you are not allowed to leave the country until you settle all debts and fines. In China, applications for UAE travel visa, business visa and work visa will all be rejected and you cannot enter Dubai;

the blacklist information is synchronized to the six Gulf countries (Saudi Arabia, Qatar, Kuwait, etc.), and travel and business visits in the entire Middle East region will be restricted, completely blocking the Middle East business travel channels.

5. offshore bank account freeze, cross-border financial transactions are completely blocked

for DIFC's public offshore accounts that are idle and neglected to be maintained, the bank will regularly carry out compliance due diligence: the enterprise is unable to provide annual audit documents, audit statements and proof of existence, and the bank will gradually restrict the collection and payment function of the account until it is directly frozen and closed.

After the account is forced to close, the procedures for withdrawing funds retained in the account are complicated. At the same time, the subsequent opening and annual examination of other offshore accounts in the Middle East, Europe and the United States under the name of individuals will be focused on the examination, and cross-border collection and payment, foreign trade settlement and overseas fund planning will be restricted everywhere.

6. domestic ODI Filing legacy, affecting cross-border compliance operations

the domestic parent company funded the establishment of DIFC companies have handled ODI Overseas Investment Filing, overseas companies have been forcibly revoked but have not handled ODI termination cancellation in the domestic Development and Reform Commission, the Department of Commerce and the Foreign Affairs Bureau:

the annual report of overseas investment stock rights and interests must be filled in every year. Long-term zero submission will be included in the list of domestic foreign exchange anomalies, which will affect the import and export tax rebates, cross-border foreign exchange purchases and the establishment of new overseas projects. If you want to file overseas investment again in the future, the approval will be strictly restricted, leaving a long-term cross-border compliance stain.

7. international business credit damaged, global investment and financing everywhere limited

DIFC commercial violation records will be kept in international credit investigation and cross-border compliance databases. When conducting overseas bidding, international loans, letter of credit settlement and overseas brand cooperation, both individuals and domestic parent companies, cooperative institutions can inquire about bad records and terminate the cooperation directly with high probability. At the same time, it is no longer possible to set up cross-border holding structures in mainstream offshore regions such as Singapore and Hong Kong.

Disclaimer

the content of this article is for general information only and does not constitute formal legal, tax or investment advice. Dubai's regulatory and business environment continues to change, and companies should consult professional consultants when formulating specific policies. Zhuoxin Enterprises is not responsible for any decisions made as a result of reliance on the information herein.

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