A company liquidation audit report is required by the authorities before the cancellation of the trade license. A liquidation audit report will list the liabilities and assets of the company.
Company liquidation is the process of shutting down a company and closing all the operations related to the company. Company liquidation is an event that occurs when a company is at loss and has no money to pay its remaining debt.
Why you need Liquidation Audit?
There could be multiple causes where a company feels the need to liquidate assets to close shop. It is not as simple as disconnecting a phone connection or turning off a light switch.
There are various reason for liquidation audit. It is mandatory for all the businesses who are closing down to submit a liquidation audit report to their relevant authorities. Without liquidation audit report, companies would not be able to get the company closure certificate from the authorities.
Moreover, liquidation audit report will list the assets and liabilities of the company and ought to preclude any objections from creditors.As the liquidation progresses, all the Company’s assets are converted to cash and distributed to the creditors or assigned to other company obligations.
There are specific rules concerning the way the assets are distributed. It is extremely important that all the relevant information is available to the liquidator. The liquidation audit helps assure the information is accurate and complete.
As company’s liquidation is completed, a post liquidation audit may be performed to verify all assets were valued and distributed properly. This post liquidation audit report will help creditors understand what occurred and how the funds (if any) they received from the liquidation were calculated. This report will reduce the chances that a creditor might question the liquidator’s actions.
What is Liquidation?
Over the last decade, GCC region has set the tone for progressive business activity. It has become the role model and a hub for many local and international companies to set up businesses. A major reason for this success can be attributed to setting up of tax free business zones and formalized and stringent, yet business friendly laws and regulation that instilled confidence in the business community to get themselves incorporated here.
While a lot of businesses pop up to take benefit from these measures, there are bound to be certain instances where starting a business would not always result in expected gains. There will be times of business closures where investors would like to recover their investments due to nonperformance, or a change in business environment resulting in loss or so many other similar reasons.
If the business does not have enough money to conduct a business or meet the expenses such as bills and salaries and the company is constantly at loss. In that case, companies will go for voluntary company liquidation as they do not have enough funds to sustain in the competitive market.
Reasons for Company Liquidation
There can be a variety of reasons where the only option is to choose company liquidation, the most common reasons for company liquidation are:
- Company has become insolvent
- Constant losses from business
- Company has not been able to conduct any trading activities for a year after being incorporated
- Company's total debts and liabilities go beyond the total value of your assets
- Company has not been registered as private or public entity
BMS Auditing will prepare the company liquidation audit report and submit it to the relevant authority where the company is registered. We are one of the leading accounting and audit firm. For liquidation audit services in UAE, KSA, Qatar, Bahrain, Oman, India, UK and USA, Contact us!