How to Close an LLP?

Limited Liability Partnership is a business entity introduced in India in 2008, through LLP. Audit of the accounts is not required, if the annual turnover of the LLP is less than Rs.40 lakh or the capital contribution is less than 25 lakhs. This feature is really helpful for small businesses, those who want to wind up their company.

LLP Winding up Overview

LLP windup can be happened two ways either voluntarily or by a Tribunal. If an LLP wants to wind up the business voluntarily, a special resolution needs to be passed with the approval of at least ¾ of all the partners. However, if the LLP has lenders, secured or unsecured, their approval is also required to wind up the company.

Winding up of LLP by Tribunal

LLP can be windup by the Tribunal for the following reasons:

  • The LLP wants to wind up voluntarily
  • Less than two partners in LLP for 6 months.
  • LLP is not positioned in clearing all its debts.
  • The LLP has committed any legal offense or worked against the integrity of the Country.
  • LLP has not filed with the Registrar Statement of Accounts and hasn’t filed the annual returns for the five consecutive financial years.
  • The Tribunal thinks that now a respective LLP should be closed.

Winding Up of LLP Procedure

To initiate the winding-up process, a resolution must be passed and filed with the Registrar within 30 days of passing the resolution. On the day of passing the resolution of LLP windup, the voluntary wind-up shall be deemed to commence.

After filing the winding up of the resolution with the Registrar, the majority of partners shall announce with the effect of an Affidavit, that LLP has no debt and is in a position to clear all the dues within the period mentioned in the declaration. And also, will not postpone the date of commencement of winding up the LLP. Along with the signed Affidavit by all the partners, the following documents are required to file with the Registrar within 15 days of passing the winding up of the resolution of the LLP.

  • Assets and liabilities statements for the period from last account closure to the date of winding up of LLP must be signed by at least two partners.
  • Valuation report of the assets of the LLP, prepared by the valuer (in case there are any assets in the LLP).

Winding up of LLP with Creditors

If the LLP has secured or unsecured creditors, then before initiating the winding-up procedure their approval must be obtained. Creditors have to announce their decision within 30 days of receiving the request for approval of winding up. If all the creditors and partners are ready to wind up the LLP, then the LLP can proceed with voluntarily winding up the process.

Appointment of LLP Liquidator

A liquidator must be hired within 30 days of passing the resolution for voluntary winding up. If there are other creditors, the approval of ⅔ creditors of Limited Liability Partnership is required to appoint a liquidator for the whole winding-up process.

The duty of the LLP liquidator is to functions and duties for the whole winding-up process of LLP. The LLP liquidator will be responsible for the style of the creditors and the rights of the partners. While committing duties, the LLP liquidator needs to maintain the proper books of accounts about the winding up of LLP. If the Liquidator fails to fulfill his/her duties, a penalty might be imposed by the ROC.

LLP Reports Filled by Liquidator

After the completion of the winding-up process of the LLP, the liquidator would prepare a report in which the conduction of the whole winding-up process and then disposed of property of the LLP will be mentioned. When the ⅔ partners and creditors of the LLP are satisfied with the report of the liquidator, a resolution of winding up the business accounts and explanation of company dissolution must be passed by the partners of the company.

The liquidator must have to send the LLP winding report along with resolution details to the Registrar and file an application to the tribunal for dissolution of the LLP.

Dissolution of the LLP

If the Tribunal is satisfied with the process followed to wind up the LLP, then the Tribunal will pass an order to dissolve the LLP. The LLP has to file a copy of the Tribunal orders with the Registrar for winding up the Limited Liability Partnership. After receiving the copy of the passed order from the Tribunal on the LLP winding-up process, the Registrar will publish a notice in the Official Gazette regarding the winding-up process of LLP and the company stands to be dissolved.

Documents required for Closing an LLP:

To close the LLP, an application is required to be made in an e-Form 24 with the below documents for the successful winding up of the Limited Liability Partnership.

  • Account statement disclosing nil assets and liabilities, certified by the Chartered Accountant in practice from the date of filling resolution to the winding date.
  • Copy of the latest Income Tax return filing.
  • Copy of the initial Limited Liability partnership agreement, along with the required changes.
  • An affidavit signed by all the partners, either jointly or separately when the business account is not opened by the company or income tax return is not filled in the last few years.
  • Copy of detailed winding up application with all the details of the LLP and the explanation of winding up the company
  • A copy of the authority to make the application and should be signed by all the partners.

Frequently Asked Questions

How do you wind up an LLP?

To wind up a company voluntarily, both the partners will make the application. Interested creditors and members should be informed about their say on the winding up of the company.

How long does it take to close an LLP?

If the ROC is satisfied with all the documents and applications, the company will be closed within 18-20 days.

How do you activate defunct LLP?

A defunct LLP can be closed by giving an application to the Registrar with the consent of all partners for striking the name from the register.

Is audit compulsory for LLP?

According to Rule 24 of LLP, the accounts of every LLP shall be audited. A company with a 25 lakhs year turnover doesn’t require accounts auditing.T9.