Closing an LLP

To close an LLP make an application to the registrar to declare LLP as defunct or wind up compulsorily with the order of the tribunal.

 

The LLP Act, 2008 provides the necessary guidelines for closing an LLP. The act provides the following ways to close the LLP:

  1. Declaring the LLP as defunct
  2. Winding up of LLP
  • Compulsory Winding up
  • Voluntary Winding up

Declaring the LLP as Defunct

Overview

The generic meaning of the word 'defunct' is a state of being non-existing and dysfunctioning. A Limited Liability Partnership is said to be defunct when it is no longer in business for more than one year. According to Section 75 of the Limited Liability Partnership Act, 2008 it states that the Registrar has rational cause to declare an LLP (not carrying on business or its operation) as defunct. Based on the provision of the Act, the name of the LLP may be struck off the register.

Procedure

  • Initially, an application is file to the ROC in eform 24 with the consent of all partners for striking off the name of the LLP under clause (b) of sub rule 1 of Rule 37 of LLP Rules, 2008.

 

  • After receiving the application, the Registrar would send a notice to the LLP and all its partners stating the intention of strike off the name of the LLP and also publish on MCA website for the period of one month for the general public.

 

  •  Application filed in eform 24 should be supported by the required documents and affidavits declaring that all the information given to be true, by all the partners.

 

  • To satisfy the registrar that LLP has sufficient provisions to release the due amount and discharge all the liabilities, obtain the necessary undertakings from the designated partners of LLP along with the application.

 

  • On the completion of one month, if there is no contrary shown by the LLP or general public, ROC may by an order strike off the name of the LLP. LLP would stand dissolved with the publication of the notice of strike off in the Official Gazette.

Reasons

  • When an LLP not carrying its business operations for the period of one year or more, this is the only reason to declare an LLP defunct and make an application to strike off the name.

Winding up of LLP

Overview

There can be two ways to wind up an LLP, either initiated voluntarily by the members or compulsorily by a Tribunal. A Limited Liability Partnership is required to pass a resolution in order to close the LLP which would need an approval of three-fourth of the total number of its partners. In case an LLP has lenders then the permission of the lenders are also required for closing the LLP.

Procedure

  • This is the initial stage wherein a resolution is filed for winding up of LLP with the registrar. This needs to be done in 30 days of the passing of the resolution. The voluntary resolution is deemed to commence on the date of passing of the resolution.

 

  • The majority of the Partners (minimum two) needs to make a declaration which is verified by an affidavit to the effect that there are no debts attached to the LLP. If have then they have sufficient provisions so they can pay within one year from the commencement of the winding up.

 

  • A verification of the declaration and statement must be filed within 15 days of the passing of the resolution immediately preceding the date of passing of the resolution for winding up. 

 

  • Along with the resolution & Affidavit the documents that need to be signed & submitted by the majority Partners are; Statement of the liabilities & assets for the time frame from last account closure to date of winding up of LLP. This needs to be attested/signed by the Partners.

 

  • If LLP has creditors then you have to obtain their consent with at least 2/3rd of the unpaid creditors.

 

  • Once creditors’ consent obtained, within 14 days provide an advertisement in a local newspaper. If in case LLP has increasing liability and assets then the appointment of liquidator is required. Appointing an LLP liquidator for the settlements and liquidation of the LLP's liabilities & the Partner rights.

 

  • Filing Report: The liquidator is responsible for preparing the report which states the manner in which the LLP closure needs to be conducted. It also mentions that the property of the LLP has been disposed of. Based on the agreement of the two third number of partners and creditors, the LLP Liquidator filed the LLP closure report to the Registrar.

 

  • If the Tribunal/court is satisfied with the winding up reports, resolutions and documents submitted by the LLP then finally it is dissolved. Once the notice of dissolution is received, the Registrar publishes a notice in the Official Gazette mentioning about the Closure of the Limited Liability Partnership.

 

Reasons

  • If the Limited Liability Partnership(LLP) wants closure.

 

  • In case the LLP has less than two Partners extending for more than six months.

 

  • Closure by a tribunal is also affected if the LLP is not in a state to pay its debts.

 

  • Often closure is lead by the court when the LLP has acted against the integrity and sovereignty of India or violated the security of the State.

 

  • If an LLP fails to file the Statement of Account & Solvency(SAS) or the LLP Annual Return with the Registrar for five continuous financial years.

 


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