LLP Closure

This article provides a comprehensive guide on how to wind up a Limited Liability Partnership (LLP) in India. It covers the process, documentation, and important considerations involved in the winding-up procedure.

Incorporation of an LLP:

LLPs are newly formed business entities introduced through the LLP Act, 2008 in India.

LLPs offer limited liability to partners and enjoy audit exemption under certain conditions.

Process of Winding Up an LLP:

1. Winding up by the Tribunal:

• Initiated by the tribunal for various reasons, such as insufficient partners, inability to pay debts, or acts against public order.
• Non-filing of financial statements or annual returns for five consecutive years can also lead to winding up.

2. Voluntary Winding Up:

• Requires approval of 3/4th of the partners.
• LLP must make a declaration of no debt or ability to pay debts within one year.
• Assets and liabilities statement, along with valuation of assets (if any), must be filed.

Documentation and Procedure for Winding Up an LLP:

Resolution for winding up the LLP should be passed and filed with the registrar within 30 days.

• Affidavit signed by the majority of partners declaring no debts or ability to pay debts within a specified period.
• Documents to be filed with the registrar:
• Statement of assets and liabilities attested by partners.
•  Valuation report (if applicable).

Other Considerations:

Form 2 should be submitted stating no unpaid sums or commitment to clear debts within a specified period.

Publication of the winding-up resolution in a newspaper circulated in the registered office territory.

Appointment of LLP liquidator, approved by the partners and creditors.

LLP liquidator prepares a winding-up report and files it with the registrar and tribunal.

Final accounts closure, disposal of property, and dissolution process.

Striking Off:

Introduction of LLP Form 24 allows easy winding up by applying to the Registrar for striking off the LLP’s name.

Prior to this amendment, the winding-up process was lengthy and complex.

After Winding Up:

LLP ceases business activities and focuses on liquidation and asset distribution.

Once the process is completed, the company will be dissolved, and the LLP will cease to exist.

Conclusion:

Closing an LLP involves following a specific process defined by the LLP Act, 2008. Whether initiated voluntarily or by the tribunal, it is essential to adhere to the necessary documentation and procedures to ensure a smooth winding-up process. The introduction of LLP Form 24 has simplified the process of striking off an LLP’s name.