Anti-Crisis Management | Expert Management Strategies

Top Reasons That May Lead to Unprofitable Business in UAE

Wrong Choice of License and Place of Incorporation

Choosing the wrong license or place of incorporation can prevent your company from reaching its intended target audience. This mistake can hinder the company's ability to operate in the desired niche and geographic area. It's important to research and understands the licensing and incorporation requirements in the UAE to make an informed decision.

Lack of Unique Selling Proposition

Not having a Unique Selling Proposition (USP) can make it difficult for your company to differentiate itself from competitors in the market. Without a USP, the company may struggle to remain competitive and attract customers. Developing a strong USP is crucial for the success and growth of any business in the UAE.

External Circumstances

External circumstances, such as an incorrect development strategy or misunderstanding of the business environment, can lead to financial losses. It's important to conduct thorough market research and analysis to avoid making decisions that could lead to adverse outcomes. Being aware of external factors that could impact the company's growth and taking necessary measures to mitigate risks can help prevent financial losses.

Risky Financial Strategy and Excessive Borrowing

Implementing a risky financial strategy or taking on excessive debt can result in difficulties paying bills and suppliers on time. This mistake can damage the company's reputation and hinder its ability to grow and succeed in the long term. Developing a sound financial strategy and managing debt responsibly is crucial for the financial stability and growth of any business in the UAE.

Consequences of an Abandoned Business

Publicity at the International Level due to Automatic Exchange

Initially, the event will be publicized internationally and you will lose your tax resident status, the moment you cease your activities in the country. This implies that all information about you and your business (such as violations, debt obligations, unfulfilled contracts in the UAE, etc.) enters the automatic information exchange system and becomes public knowledge. The existence of such information in the international systems will have detrimental effects on you and your business as a whole which will eventually ruin your reputation and demonstrate your incapability and irresponsibility.

Negative Impact on Credit History Because of Unresolved Obligations and Unpaid Debt

Secondly, outstanding debts and obligations will have a bad impact on your credit history worldwide. Almost all developed countries use the international banking system for collecting information about business entities around the world. This is a sort of international database that contains data on all debts, penalties, unfulfilled duties, businessmen's violations of labor laws, and much more. Leaving a business with such “luggage”, you run the risk of being blacklisted not just in the UAE but also in other developed nations, as well as with major international banking organizations. As a result, you have much fewer opportunities to get loans and loans for the expansion of a new firm on favorable terms.

Restriction on Free Movement through and within UAE

Thirdly, you limit your freedom of movement. With numerous lines passing through UAE, it is the biggest transportation hub. You won't be able to use the UAE as a transit point any longer if you have unpaid debts on the territory of the nation because you will be deplaned and taken into custody until all outstanding debts are settled.

Possible Negative Interpretation of Income as Fraudulent

Lastly, your income may be considered fraud and you will be the subject of a criminal investigation, which could result in a worldwide search

How to Resolve a Crisis Situation Legally?

All of the aforementioned considerations imply that, if you are about to enter a crisis or are having financial troubles, you must act in accordance with the text of the law, regardless of the scenario and circumstances.

Business Bankruptcy

Court-ordered liquidation of the business due to financial insolvency

Liquidation of a Legal Entity

With a subsequent business liquidation process, it is important to close all bank accounts and debts.

Business Sale

In the UAE, a ready-made working business setup in Dubai mainland or freezone area is always in demand, making it a lucrative solution.

Temporary Suspension of a License

A business may be put on hold for up to three years while continuing to operate as a licensed legal entity.

Financial
Restructuring

Taking legal action and starting a thorough financial recovery process

Crisis
Management

Put your faith in our solutions to pull your company out of a challenging circumstance.

With the help of our certified company formation consultants, you will be able to go through a financial recovery process to discover a way to pay off debts, and depending on your goals, organize your business or finish all necessary paperwork.

Learn More About How to Get Out of Crisis

Bankruptcy

If you realize that your company's financial situation is approaching a critical indicator, you must act quickly to appear in court and begin a financial recovery action before your creditors have the authority to file a criminal complaint against you. Upon examination of your application, the court will appoint a professional (trustee) to do a financial audit, determine the total amount owed to creditors, and assist you in creating a repayment plan. This document is filed with the court and given to creditors who are compelled to concur to these terms because they want to be paid back by you. The Financial Restructuring Committee is responsible in this case for monitoring the management of the bankrupt company's operations.

Liquidate a Legal Entity and Revoke a License

You must put an end to the business as soon as possible if it did not succeed, you no longer wish to conduct business in the United Arab Emirates, or you recognized that you selected the wrong jurisdiction or license type. In this situation, you must pay out the staff, deregister, terminate the license, shut all bank accounts, and fulfill all your financial obligations to counterparties. This process will take little time if there are no debts. If you wish to stay in the UAE and intend to resume your employment, then you will need to go through the process of registering a legal entity again. However, this time picking the appropriate location and gaining approval for appropriate operations is necessary.

Sell Business

A working firm that is already established is always in great demand in the UAE. The high level of commercial activity in the nation and the ongoing flood of new investors are the main reasons for this. Businesses with the following traits are valued the most: they have a thriving client base, hired staff, completed a financial audit, developed a development plan, and the company has been running effectively in the UAE for a considerable amount of time. Transferring the firm to a new owner is a sensible and speedy legal option to exit the venture if you do not want to continue developing it after receiving a respectable financial reward for your work. Specialists in SORP offer a wide range of services to support business acquisition and disposition activities.

Freeze a License for a Certain Period

To conduct business in the UAE, you must make specific investments, including license renewal, getting an office space for rent, and legal and accounting services. There are situations when your business, although being in the appropriate location and holding the necessary permissions, fails to generate the expected profit, making it unprofitable to cover its expenses. Such situations compel you to consider stopping your activity. In this case, SORP consultants recommend using the license freeze service. This step will save you from having to go through the challenging process of liquidation and start over from scratch. You will retain the legal entity and license for up to three years.

Anti-Crisis Management, Financial Restructuring, and Cost Optimization

Control, audit, and risk management are crucial for corporate success. Take cost-optimization measures if you realize that operating costs are too high. It is essential to evaluate the efficiency of the staff's job and create a system for boosting labor productivity in order to accurately assess and identify the "problem" areas of your operation. If necessary, it's important to retrain key employees and optimize the staff's size and composition. Moreover, management reports that accurately reflect the situation of the business is required.

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