Winding Up of LLP
A winding up of LLP can be initiated voluntarily or by striking off or by a Tribunal. If a LLP is to initiate winding up voluntarily, then the LLP must pass a resolution to wind up the LLP with approval of at least three-fourths of the total number of Partners. If the LLP has lender’s, secured or unsecured, then the approval of the lenders would also be required for winding up of LLP.
To begin the process for winding up of LLP, a resolution for winding up of LLP must be passed and filed with the Registrar within 30 days of passing of the resolution. On the date of passing of resolution of winding up of LLP, the voluntary winding up of LLP shall be deemed to commence. Registration Arena can help you wind up your LLP quickly and easily.
Voluntary Winding Up o LLP
LLPs can also be wound-up easily with the approval of 3/4th of the partners. To start the liquidation process for a LLP, a greater part of the designated partners, will have to make a declaration that the LLP has no debt or that it will be competent to pay the debts in full within a period of not more than 1 year from the start of winding up. Further, the LLP partners must declare that the LLP is not being wound up to defraud any person or persons. This declaration for winding up of LLP must be prepared along with a statement of assets and liabilities until the most recent practicable date right before the making of declaration for winding up. A valuation of the assets related to the LLP prepared by a valued must also be submitted, if there are assets in LLP. Voluntary winding up will be deemed to start on the date of passing of resolution for the reason of voluntary winding up.
Winding Up by Tribunal
Winding up of LLP can be initiated by a Tribunal for the following reasons:
1.The LLP wants to be wound up.
2.There are less than two Partners in the LLP for a period of more than 6 months.
3.The LLP is not in a position to pay its debts.
4.The LLP has acted against the interests of the sovereignty and integrity of India, the security of State or public order.
5.The LLP has not filed with the Registrar Statement of Accounts and Solvency or LLP Annual Returns for any five
consecutive financial years.
6.The Tribunal is of the opinion that it is just and equitable that the LLP should be wound up.
The Ministry of Corporate Affairs has recently amended Limited Liability Partnership Rules, 2009 by introducing the Limited Liability Partnership (Amendment) Rules, 2017 with effect from 20th May, 2017. With this amendment, LLP Form 24 has been introduced by the MCA and it is now possible to easily close a LLP by making an application to the Registrar for striking off name of LLP. Before the introduction of the Limited Liability Partnership (Amendment) Rules, 2017, the procedure for winding up of LLP used to be long and cumbersome. However, with the introduction of LLP Form 24, the procedure has been made easy and simple.
At Registration Arena, we are continuously available to help you Winding Up of LLP. Winding Up of LLP can be done through Registration Arena in all major cities including Hyderabad, Mumbai, and New Delhi, Chennai, Kolkata & all other Indian cities.
Procedure for closing a LLP by filing Form 24:
Step 1: Cease Commercial Activity
LLP Form 24 can be filed only by LLPs that never commenced business or have ceased commercial activity. Hence, if the LLP is operational and the promoters wish to close the LLP, the LLP must first cease all commercial activity.
Step 2: Close Bank Account(s)
LLP Form 24 can be filed only by those LLP that have no creditors and no open bank account. Hence, prior to filing LLP Form 24, any bank account opened in the name of the LLP must be closed and a letter evidencing closure of the bank account in the name of the LLP must be obtained from the Bank.
Step 3: Prepare Affidavits & Declaration
All the Designated Partners of the LLP must first execute an affidavit, either jointly or severally, that the Limited Liability Partnership ceased to carry on commercial activity from (Date) or has not commenced business.
Further, the LLP Partners must also declare that the LLP has no liabilities and indemnify any liability that may arise even after striking off its name from the Register. The liability of the Partners would not be extinguished even after closure of a LLP while using Form LLP 24
Step 4: Prepare Documents
Along with Form LLP 24 the income tax return of the LLP and LLP deed must be enclosed. In case the LLP has not filed any income tax return and it has not carried on any business activity, then it is not required. Else, a copy of the acknowledgement of the latest Income-tax return filed must be attached with the application for closing the LLP.
Step 5: File Any Pending Documents
After incorporation of a LLP, the LLP agreement must be filed with the MCA within 30 days of registration. In case this compliance was missed and LLP agreement was not filed, then the initial LLP agreement, if entered into and not filed, along with any amendments must be filed.
Also, any overdue returns in Form 8 and Form 11 up to the end of the financial year in which the limited liability partnership ceased to carry on its business or commercial operations must be filed before filing LLP Form 24. The date of cessation of commercial operation is the date from which the Limited Liability Partnership ceased to carry on its revenue generating business and the transactions such as receipt of money from debtors or payment of money to creditors, subsequent to such cessation will not form part of revenue generating business.
Step 6: Obtain Chartered Accountant Certificate
Once all the documents for filing of LLP Form 24 is prepared, a statement of accounts disclosing NIL assets and NIL liabilities, that is certified by a practising Chartered Accountant up to a date not earlier than thirty days of the date of filing of Form 24 must be obtained.
Step 7: File LLP Form 24
The above mentioned documents along with LLP Form 24 (Download LLP Form 24) can be then filed with the MCA to strike off name of LLP. On processing the application, if found acceptable, the concerned Registrar of Companies would cause a notice to be published on the MCA website announcing the striking off of the LLP.
Reasons for LLP Closure
A LLP that doesn’t file its compliance on time incurs fines and penalty, including debarment of the Partners from starting another LLP or Company.
LLPs can be wound up easily through IndiaFilings for just Rs.15899. On the other hand, a dormant LLP or non-compliant LLP could potentially acquire more penalty, if compliance is not maintained every year.
Easy to Close
The formalities for winding up of a dormant LLP are relatively simple and easy to complete. Hence, its best to close an inactive LLP at the earliest.
The Ministry of Corporate Affairs has simplified the process for liquidation or winding up of LLP through various initiatives. Hence, akin to incorporation, a LLP can be wound up easily with minimal procedural requirement.
Procedure For LLP Closure
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