Winding Up of LLP

What is winding up of an LLP?

Winding up an LLP means legally closing the partnership, settling its liabilities, and removing its name from the MCA register.

An LLP can be closed in three ways:

1. Strike off using Form 24 under Section 75 of the LLP Act, 2008
2. Voluntary liquidation under Section 59 of the IBC, 2016
3. Winding up by the NCLT under Section 64 of the LLP Act

The Limited Liability partnership is a basic partnership in which all the partners share limited liabilities as the LLP is set up under certain legal terms and documentation. There is a specific process as to how an individual can register his or her LLP. As there are advantages of registering as an LLP in India, there are also some disadvantages. Many of them are also unsure about the process of Winding up an LLP. Here, we are going to take a look at how to wind up an LLP in India.

Section 63,64 and 65 of the LLP Act,2008 regulates the process of winding up of the LLP. The Limited Liability Partnership winding up can be initiated voluntarily or by a tribunal. Let us take a look at both in detail.

Winding up of an LLP by the tribunal

The Winding-up of the LLP is initiated by a tribunal for the following reasons:

• The LLP wants to wind up.
• There are less than two partners in the LLP for more than 6 months.
• The LLP is not in a position to pay debts.
• The LLP has acted against the interest of the sovereignty and the integrity of India, the specified security of the state or public order.
• The LLP has not filed with the statement of accounts and solvency or the LLP annual returns for any five consecutive financial years with the Registrar.
• The Tribunal thinks that is just and equitable that the LLP should windup.

Voluntary Liquidation of LLP under IBC

Solvent LLPs that have assets or creditors use voluntary liquidation under Section 59 of the IBC, through an Insolvency Professional acting as liquidator. The process mirrors company liquidation:

1. Partners file a declaration of solvency.
2. Partners pass a resolution.
3. Creditors representing two-thirds of the debt value approve it.
4. The liquidator realises assets and settles liabilities.
5. The NCLT passes the dissolution order.LLP Strike Off via Form 24

Eligibility

The LLP has not carried on business for at least one year, or has not commenced business since incorporation, and has no assets or liabilities.

File Returns

File pending Form 11 (annual return) and Form 8 (statement of accounts and solvency) up to the date the LLP ceased business.

Close Accounts

Close the LLP’s bank account and surrender its GST and other registrations. Keep the bank closure certificate ready for filing.

Partner Consent

All designated partners sign an affidavit and an indemnity bond confirming the LLP has no liabilities and has not carried on business.

File Form 24

File Form 24 on the MCA portal with the ₹5,000 government fee. Attach the statement of accounts, affidavit, indemnity and consent of partners. [verify fee]

Name Struck

The ROC issues a public notice. If there are no objections, the LLP’s name is struck off and it ceases to exist legally.

Form 24 vs Voluntary Liquidation

Procedure to Windup LLP

How-to Wind-up LLP?

To initiate the process of winding up of an LLP a resolution for winding up the LLP should be passed and filed with the registrar within 30 days of passing the resolution for the same. The date of passing the resolution of the winding up of the LLP the voluntary winding up shall be deemed to commence.

After the resolution for winding up of the LLP is filed with the registrar, the majority of Partners shall make a declaration that is verified by an affidavit to the effect that the LLP has no debts or that it will be in the position to pay the full debts within a period as mentioned in the declaration (This period should not exceed one year from the date of the commencement of winding up of the LLP).

Along with the affidavit that is signed by the majority of the Partners the following documents should be filed with the registrar within 15 days of passing the resolution for winding up an LLP:

1. The statement of the assets and liabilities for the period from the last two accounts closure to date of winding up of LLP attested by at least two partners
2. Report of the valuation of the assets of the LLP prepared by the valuer if there are any.

Publication of the resolution

Now after passing the resolution of winding up and receiving the consent from the creditors for winding up within 14 days, the LLP is required to publish an advertisement regarding the resolution of the winding up in a newspaper that is circulated in the territory where the registered office is located or where the office of the LLP is registered.

Striking off

The Limited Liability Partnership Rules, 2009 was recently amended by introducing the Limited Liability Partnership Rules,2017 with effect from 20th May 2017. Under this amendment form, LLP 24 has been introduced by the MCA and now it is possible to windup the LLP easily by just making an application to the Registrar for striking off the name of the LLP.

Before the introduction of this Limited Liability Partnership Rules,2017 the procedure for winding up an LLP used to be very long and cumbersome.

What happens after the winding-up on an LLP?

Once the process of Winding up begins a company is not allowed to pursue its business except in case if the LLP has to complete the liquidation and the distribution of the assets. By the end of the process, the company will be dissolved and the LLP will effectively cease to exist.

FAQs

What is Form 24 for LLP? Form 24 is the MCA application for striking off a defunct LLP’s name from the register.

Can an LLP with pending returns file Form 24? No. Pending Form 8 and Form 11 filings must be completed first.

How much does it cost to close an LLP? The government fee for Form 24 is ₹5,000, plus professional and documentation costs. [verify]

How long does LLP closure take? Strike off usually takes 3–6 months.