Limited Liability Partnership (LLP)
Limited Liability Partnership is a type of business structure in which all the partners have limited liabilities. Generally, an LLP is set up under legal terms and documents. There is a defined procedure for LLP Registration. There are some benefits to be in an LLP but like everything, it has its own disadvantages too. As well as there are many steps required for closing of an LLP. Therefore, it so happens that people are confused as to how to get their LLP registered. However, most of them don’t even know that there is a defined procedure for the closing of an LLP.
Related: Why an LLP over a Partnership Firm
Described below, to remove such misconceptions is a procedure with which you can close LLP in India.
The Steps for the closing of an LLP
1.Declaring your LLP Defunct
An application should be made by any one of the partners stating that registered Limited Liability Partnership is no more functional or simply is defunct and submit it to the Registrar. An e-Form 24 is required to be filed by the partners under Section 37(1)(b) of the Companies Act, 2013. All the documents stated in the form are a major requirement which is to be submitted with the form. The name of an LLP will be struck off from the LLP’s register.
2.Winding up your LLP
There are two stages in the winding up process in the closing of an LLP i.e. Winding Up and Dissolution.
In the LLP Act 2008, Sections 63, 64 and 65 regulates the process of winding up an LLP. There are again two ways in which you can wind up your LLP. These two ways are:
Voluntary winding up
When partners decide amongst themselves to stop and close the LLP. The closing of an LLP can be done voluntarily by passing a resolution with the approval of at least total number 3/4th of the partners in the partnership. A copy of the resolution has to be filed with the Registrar on Form 1 within 30 days of passing the resolution. A Copy of the authorization given to the person who takes care of during the process of winding up in the closing of an LLP.
Winding up with creditors
At least 2 partners from the majority of partners have to make a declaration in Form 2 stating that they have no debts or they will pay their debts within a certain period of time. Without exceeding 1 year from the date of passing of the resolution for winding up. This statement must be signed by at least 2 designated partners. It must also contain a statement that the LLP is not being wound-up to defraud any person(s). Dues of the creditors can be paid before filing the declaration.
A verification of the declaration and statement must be filed on Form 3 within 15 days of the passing of the resolution immediately preceding the date of passing of the resolution for winding up. The documents required to be filed are:
(a) A statement of assets or liabilities (starting from the last date when accounts were prepared up till the latest practicable date immediately before making the declaration) must be filed in Form 4.
(b) A valuation report of the assets, if any, by a value.
All creditor, whether secured or unsecured, of the LLP, must be sent, by registered post or speed post or email or courier:
(a) A copy of the declaration filed in Form 2.
(b) The estimated amount of claims due to and an offer to accept the claims.
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The Creditors must give their opinion in respect of voluntary winding up within 30 days of the receipt of the declaration to the LLP.
- As soon as the affairs of the LLP are wound-up i.e. when assets have been liquidated and liabilities have been discharged, Limited Liability Partnership liquidator will make a report, in Form 9, stating the manner in which winding up has been conducted, including a final closing of accounts with explanations, and the property has been disposed of. He will then seek approval of the partners and creditors for dissolution.
- A resolution seeking approval must be circulated, whether in physical or electronic form. Partners and Creditors can seek clarifications within 30 days of circulation. Any further information can also be requested and must be provided within 30 days of receipt of the request.
- If 2/3rds of the total number of partners or 2/3rds of the value of creditors, after considering the report, are satisfied that the LLP be wound-up, then a resolution for dissolution must be passed within 30 days of receipt of the report, winding up accounts and explanations for dissolution in case of a meeting or within 30 days of circulation of the resolution or further information, whichever is later.
- But if the requisite 2/3rds for the approval of the report cannot be achieved, then the LLP liquidator must make an application to the National Company Law Tribunal for a decision.