Overview of Closure of LLP
LLP or Limited Liability Partnership is a partnership wherein all the members (partners) have limited liabilities. Normally, an LLP is set up in legal terms and documents and policies.
The LLP Act, 2008 also offers certain essential procedures for closure of an LLP. Any LLP can close down its business by adhering or implementing any of the following two ways:
- Declaring the LLP as Defunct
- Winding up of LLP
Declaring the LLP as Defunct
In case the LLP wants to wrap up its business or where it is not carrying on any business operations, it can make an application to the Registrar of Companies (ROC) for announcing the company as defunct and eliminating the name of the LLP from its list of LLP.
E-Form 24 is obligatory to be filed with ROC for striking off the name of LLP. Similarly, Registrar also has the power to strike off any defunct LLP only after satisfying himself the need to strike off and has a real reason. Though, in such cases, the registrar has to send a notice to the LLP of his intent and request to send their representation within 1 month from the date of such notice. The (ROC) Registrar shall also publish on its website such a notice or content of the application made by the LLP for a period of one month for the info of the general public. If there is no reply received within the stated period by the registrar from LLP, then the registrar may strike off the name of LLP from its register.
Winding up of LLP
Winding up is a process, wherein all the assets of the business are disposed of off for the reason to meet the liabilities of the same and after the liabilities are met and after if surplus any remains, it is distributed among the owners.
The LLP Act 2008 provides for following two methods for winding up the LLP i.e.
- Voluntary winding up
- Compulsory winding up
In Voluntary winding up, the partners may among themselves choose to wound up the operations of the LLP.
In Compulsory winding up, limited liability partnership will be compulsorily be wound up by the Tribunal:
- If the limited liability partnership (LLP) chooses that limited liability partnership should be wound up by the Tribunal.
- for a tenure of more than 6 months, the number of partners of the limited liability partnership is reduced below two.
- if the limited liability partnership (LLP)is incapable to pay off its outstanding debts.
- if the (LLP) limited liability partnership has acted against the interests of the sovereignty and integrity of India and also acted against the security of the State or public order.
- if the limited liability partnership (LLP) has made a defaulting in filing with the ROC or Registrar the Statement of Account and Solvency or annual return which is mandatory compliance for any five consecutive financial years.
If the Tribunal is of the opinion that it is just and equitable that the limited liability partnership is wound up.
Procedure for Winding Up
- Days’ Work done
File form 24 with the ROC along with the declaration from the partners.
- Approx. 4 working days
Along with the main application, also submit indemnity bonds and affidavit stating that the information is true to the knowledge of all the partners. Approx.20 working days The Registrar will publish a notice on its website containing the substance of the application for a period of 1 month. Approx.10 working days After one month, the registrar will remove your LLP's name from the register and publish a notice in the Official Gazette, thereby legally close/dissolve the LLP.