Introduction
Dubai is one of the fastest-growing business cities and thus draws the attention of entrepreneurs and investors from all over the world. For businesses of all sizes, Dubai comes with a bundle of opportunities due to its strategic location, advanced infrastructure, and business-friendly atmosphere.
However, there may arise cases when a business owner has some valid reasons for keeping the license of his or her business on hold rather than canceling it. That is where the concept of “license freezing” comes in.
In this blog, you will learn about what is license freezing in Dubai along with its requirements and procedure for taking that route.
What is License Freezing in Dubai?
License freezing in Dubai is a status where the business license will be temporarily suspended for the period chosen by the license owner, enabling him to stop his business without fully canceling his license.
In such a frozen period, the business does not need to renew or pay any license-associated fees, ultimately putting a hold on the activities of the company. Such options are especially good for businesses facing operational and financial difficulties because of short-term constraining reasons or business restructuring.
License freezing does not amount to license cancellation. While cancellation would mean the permanent closure of the business, freezing
What Could be the Possible Reasons for License Freezing in Dubai?
There could be several reasons one would want to freeze his or her license in Dubai. Some common reasons that impose this are:
1. Financial Difficulties
Businesses may fall into a financial crisis as a result of which carrying on the business seems not possible. Freezing of license provides an avenue where the owner can stall activities without adding extra costs while they take time to work out their issues regarding finance.
2. Business Restructuring
When a company undergoes restructuring, it may be required to suspend activities. License freezing allows flexibility in putting a hold on the activities for a while until changes are effected.
3. Market Fluctuations
Slowing economic times or fluctuations in the market force a proprietor to go on a temporary pause. Freezing the license helps the business survive during that storm to try and work its way back when the market eventually starts getting better.
4. Personal Reasons
Business owners experience personal issues that may require them not to actively engage in running the business. License freezing provides a way of putting the business on hold without any need for cancellations.
5. Strategic Pause
Freezing of a license may be part of a strategic decision by some business owners where there is a need to regroup and re-evaluate their current business model or venture into other opportunities before resuming business.
What are the Requirements and Conditions for License Freezing in Dubai?
- The business entity should be clear of any fines, penalties, or court cases.
- The company should not have any backlog of dues pending, and all the previous liabilities would need to be met.
- A valid reason for freezing the license, such as financial issues or re-structuring of business, may be required.
- Freezing application needs to be submitted before the expiration of the license
Adherence to any relative condition may mark the success of the application.
Which Documents are Required for License Freezing in Dubai?
- Copy of the present trade license
- Duly supported letter of request or application form including the reasons for freezing the license.
- Board resolution in case of a multi-shareholder business
- Proof of payment of any outstanding fees/penalties
- Copies of identification documents of the owner(s) or shareholder(s) of the business
- Other additional documents may be required, depending on the jurisdiction; this may include a tenancy contract or labor department clearance certificate.
What is the Process for License Freezing in Dubai?
Freezing a business license in Dubai is a multi-step process that varies based on the type of the business and where this license was issued. Below is the step-by-step process of license freezing:
| Step | Process |
|---|---|
| 1. Establish Eligibility | To begin with, eligibility must be established for license freezing. In some jurisdictions or sometimes for certain business activities, certain specified criteria have to be fulfilled. |
| 2. Prepare Required Documents | The application shall be supported by documentation that shall include a copy of the trade license, board resolution in case of companies, explanatory letter for freezing license reason, and any other document so requested by the relevant department. |
| 3. Submit the Application | After that, an application for freezing a license will be submitted before the respective government in case of DED or the relevant free zone authority in which the business is registered. |
| 4. Pay Applicable Fees | There may be certain fees charged to freeze a business license. These are determined by the jurisdiction under which the license is to be frozen and the nature of the business. Keep your application complete by paying all the attached fees. |
| 5. Confirmation | You will be notified by the relevant authority once your application gets approved that your license has been frozen. It usually lasts one year and after that, you can either renew the freezing status or reactivate the license. |
| 6. Re-activate or Renew | At the end of the freezing period, you can either reactivate the license and continue with your business operations or re-freeze the license if you are not yet ready to restart your business. |
What are the Benefits of License Freezing in Dubai?
Freezing the license offers various benefits for business people in Dubai:
1. It Saves Money
This is a good way of cutting off the expenses meant for license renewal, office space, and salaries of employees during the freezing period.
2. Flexibility
License freezing brings on flexibility to business owners, who may want to temporarily pause business operations. It provides the best chance to go back to the beginning and amend the business strategy as necessary, without worries about operational costs while they are rebooting their projects.
3. Business Name Protection
Freezing the license protects the business name and its registration against others using that name while the license is frozen.
4. No Need for Cancellation
Since a licensing freeze is a temporary measure, the business does not have to face the long and bulky process of license cancellation. It is, therefore, much easier to get back into business.
5. Time to Restructure
License freezing makes much-needed time for restructuring businesses by removing the additional load of operational expenses.
What are the Implications of License Freezing in Dubai?
While license freezing has numerous advantages, it has certain implications as well that need to be known to entrepreneurs:
1. Inability to Operate
There will not be any commercial activity happening with the business during the freezing period. It will not be allowed to enter into a contract, issue an invoice, or execute any kind of transaction.
2. Consideration for Employees
In the case that a company maintains employees, the concept of license freezing will have to lead one to consider its consequences for the workforce. Most of the time during the freeze-related period, employees will either be let go or transferred to some other organization.
3. Compliance Requirements
In these cases, the business would still need to fulfill some obligations, which may include the upkeep of a registered office address and the filing of specific documents with the competent authorities.
4. Limited Freezing Period
This is, in general, good for one year after which the owner needs to either restore the license or apply for an extension of the ‘freeze’ status.
5. Consequences on Business Relations
It may also have implications for relations with suppliers, customers, and partners. Stakeholders will require clear communication regarding the freezing of the license, the reason behind such a step, and when the operation is likely to be resumed.
Conclusion
Freezing of licenses in Dubai is a good way out of business owners’ decision to stop the business temporarily so that owners can keep on holding their licenses. This may be flexible and also may give you more savings, besides the name protection of the business from being taken by others.
Thus, license freezing is the most appealing solution to companies when they undergo a crisis, when a corporation is involved in restructuring processes, or some other challenges of the enterprise. On the other hand, the license freezing should be complemented with all the implications and complete compliance with the current regulations.
By being strategic about the underlying reasons for freezing your license and going by the right steps you can optimize the advantages that come with it and establish your business on a strong footing when you are ready to get back into operation.
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Frequently Asked Questions (FAQs)
Freezing of the license essentially means the temporary halting of the operation of the business, and it can be reactivated after some time. License cancellation is the permanent closure of your business, wherein, after canceling the license, there is no chance to activate the same business again.
Typically, it remains frozen for one year. You can then extend the status of the freeze by renewing or reapplying.
Yes, the Dubai free zones are among the free zones in which the approval to freeze licenses is given. The procedures and formalities may vary from one free zone authority to another.
Freezing your license means either the termination of the employee or his/her transfer to another entity. There can be certain labor laws as well as employee laws that must be followed during the freeze period as employee contracts will be dealt with those laws.
Freezing the license does not harm the registration of the name of your business. Your business name will still be covered even during the freeze time so that no one will use your name in illegal matters.
If there are some legal issues with your business, then consult with the legal authorities before applying for license freezing. Whether the license freezing is possible or not depends on the type of legal issues.
