/ Company Closure / Closing LLP

CLOSURE OF LLP IN INDIA

A business may be required to be closed due to various reasons, like non-operation, closure of business, recurring losses, the passing of the key managerial person, the dispute among promoters, un-ability to pay debts of the LLP, etc. Closing or winding up of an LLP is a challenging task, where the designated partners and all partners must first decide on the best method available under the LLP Act, 2008 to wind up the LLP. In case the LLP does not have liabilities or debts to pay it can be closed voluntarily by a unanimous decision of all the partners of the LLP and after that, an application can be filed with the registrar to strike down the name of LLP from its register. However, where the LLP have debts to pay, or there are creditors/liabilities, the LLP must approach the National Company Law Tribunal for closure.

Ways in Which LLP can be closed

  1. Winding-up
  2. Declaring the LLP as Defunct 
  • Winding up of LLP

Section 63, 64 and 65 of LLP Act 2008 governs the process for winding up of the LLP. It is the process where all the assets of the business are disposed off to meet the liabilities of the same and surplus any, is distributed among the owners. The LLP Act 2008 provides for the following two modes for winding up the LLP i.e.:

  1. I) Voluntary winding up
  2. II) Compulsory winding up

Voluntary Winding-up: Under this, the partners may between themselves decide to stop and wound up the operations of the LLP.

Compulsory winding up – A limited liability partnership may be compulsorily wound up by the Tribunal,—

  • if the limited liability partnership decides that limited liability partnership be wound up by the Tribunal;
  • if, for a period of more than six months, the number of partners of the limited liability partnership is reduced below two;
  • if the limited liability partnership is unable to pay its debts;
  • if the limited liability partnership has acted against the interests of the sovereignty and integrity of India, the security of the State or public order;
  • if the limited liability partnership has made a default in filing with the Registrar the Statement of Account and Solvency or annual return for any five consecutive financial years; or
  • if the Tribunal is of the opinion that it is just and equitable that the limited liability partnership is wound up.
  • Declaring LLP as defunct

This is the easiest and simple way to close a Limited Liability Partnership (LLP) but there are situations: –

  • LLP is inoperative from the date of incorporation or inactive for a period of at least one year and
  • LLP does not have any assets/liabilities as on the date of application

The Process starts as follows: –

  • A meeting of all the designated and Partner of Limited Liability Partnership (LLP) shall be called in with agenda in the notice.
  • Consideration of both the conditions that LLP is inoperative since incorporation or does have any business transaction in last one (1) year as well as no assets or liabilities is pending in the meeting.
  • Taking approval from all the partners of the LLP.
  • Preparation of all the documents for closure of LLP.
  • Filling of form to respective state, ROC.

Documents required for closure of LLP

The following documents are required for closure of LLP –

  • Detailed Application for Closure of Limited Liability Partnership(LLP);
  • An affidavit executed either individually or jointly by all the Partners;
  • Consent of all the partners;
  • Statement of accounts showing Nil assets and liabilities certified by Chartered Accountant in practice not older than 30 days from the date of filing of an application;
  • A copy of the acknowledgement of latest Income Tax Return;
  • Initial LLP Agreement along with all supplementary agreements, if any.

Process of closure of LLP or Strike off of an LLP

  • Close the Bank Account of the LLP;
  • Sell the assets, if any and pay off the liabilities, if any;
  • Take the written consent of all partners for strike off;
  • Drafting of all the requisite documents for closure of LLP;
  • Filing of Form 24 with the Registrar.
  • Once, the E-form 24 is filled by the LLP to the concerned jurisdictional Registrar, it has to wait for approval from the Registrar as to whether all documents attached in forms are proper or not. Registrar may ask for any additional documents for his satisfaction. Once, Registrar is satisfied, he shall send the name of the LLP for publication in the official gazette asking to raise objections from the general public. If no objection is received, the Registrar will strike off the name of LLP from its register.

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