Winding Up Of LLP

Haven’t started business since incorporation? Close your LLP and stop complying with routine compliances.

Talk with our experts and wind up your LLP!

Get Started!

    How To Dissolve A Limited Liability Partnership

    In 2008, India became the first Country in the world to create a corporate structure known as a Limited Liability Partnership (LLP). If the annual revenue of the LLP is less than Rs.40 lakh or the capital contribution is less than Rs.25 lakh, then an audit of the accounts is unnecessary. This function is of great use to individuals who own small enterprises and want to dissolve their organization.

    The dissolution of an LLP might occur in one of two ways: voluntarily or via the intervention of a Tribunal. If an LLP intends to dissolve the company voluntarily, a specific resolution must be made, and it must have support from at least three-quarters of all partners. If, on the other hand, the LLP has lenders, whether secured or unsecured, the consent of such lenders is also necessary to dissolve the firm.

    The Dissolution Of An LLP By The Tribunal

    The following are some of the reasons why the Tribunal might wind up an LLP :

    • The LLP would want to dissolve of its own will.
    • LLP has had fewer than two partners throughout the last six months.
    • LLP is not in a position to pay up all of its obligations at this time.
    • The Limited Liability Partnership (LLP) is responsible for any criminal conduct or activity that undermines the integrity of the Country.
    • LLP has not submitted its Statement of Accounts to the Registrar and has not abandoned its Annual Returns for the last five consecutive years of financial activity.
    • The Tribunal thinks the relevant LLP should be wound up now.

    Procedure For The Winding Up Of An LLP

    It is necessary to have a resolution approved and then submit it to the Registrar within the next 30 days after the resolution is passed to start the winding-up procedure. It is agreed that the voluntary winding-up of the LLP should be regarded to begin when the key to winding up the LLP is passed.

    After submitting the resolution to wind up the limited liability partnership (LLP) with the Registrar, the majority of the LLP's partners are required to declare, in the same manner as an affidavit, that the LLP has no debt and can pay off all of its obligations within the time frame specified in the declaration. In addition, the date on which we will start winding down the LLP will not be delayed. In addition to an affidavit that each of the partners has signed, the following papers need to be filed with the Registrar within fifteen days after the decision to wind up the limited liability partnership (LLP):

    1. A minimum of two partners' signatures are required on asset and liability statements covering the period beginning with the most recent account closing and ending on the day the LLP will wind up.
    2. Prepared by the valuer, the valuation report on the LLP's assets may be seen here (in case there are any assets in the LLP).

    Participation of Creditors in the Winding Up of LLP

    If the LLP has either secured or unsecured creditors, then the consent of those creditors must be sought before beginning the process of winding up the business. Within the first thirty days after receiving the request for approval of the winding up, creditors are required to notify their decision. If all of the LLP's creditors and partners are ready to close the business, then the LLP can go through the voluntary closing process.

    Appointment Of LLP Liquidator

    Within thirty days after the resolution for voluntary winding up is passed, a liquidator has to be engaged and put into place. If there are additional creditors, the consent of at least two-thirds of the creditors of the Limited Liability Partnership is necessary to appoint a liquidator throughout the whole process of winding up.

    It is the responsibility of the LLP liquidator to perform all of the activities and obligations necessary during the whole process of winding up the LLP. The LLP liquidator will be accountable for the partners' rights and how the creditors are handled. While carrying out responsibilities, the Liquidator of the LLP is obligated to keep accurate books of accounts concerning the dissolution of the LLP. If the Liquidator cannot carry out their responsibilities, the ROC may decide to levy a penalty on them.

    LLP Reports Filed by The Liquidator

    Following the conclusion of the LLP's winding-up procedure, the Liquidator will compile a report in which they will detail how the winding-up procedure was carried out in its entirety, as well as the properties that the LLP sold off. When at least two-thirds of the company's partners and creditors are satisfied with the Liquidator's report, the company partners must approve a resolution to wind up the company's accounts and explain why the firm has been dissolved.

    For the limited liability partnership (LLP) to be dissolved, the Liquidator must submit an application to the Tribunal and give the Registrar the LLP winding report that includes the resolution information.

    Dissolution of LLP

    The Limited Liability Partnership (LLP) will be dissolved if the Tribunal decides that the procedure for winding up the LLP was satisfactory and then issues an order to that effect. As part of the winding up of the Limited Liability Partnership, the LLP must provide a copy of the Tribunal orders to the Registrar. After the Registrar has received a 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 the LLP. At that point, the company is likely to be dissolved. The information will discuss the winding-up process of LLP.

    Documents Required for Closing an LLP

    To successfully wind up a limited liability partnership (LLP), an application must be prepared in an e-Form 24 and accompanied by the documents listed below. This application must be submitted to shut down the LLP.

    • Account statement from the date of the filing resolution up to the winding, certifying that a Chartered Accountant discloses no assets or liabilities in practice.
    • A copy of the most recent tax return that was submitted.
    • A copy of the original agreement for the limited liability partnership and any necessary modifications to that document.
    • An affidavit that has been signed by all of the partners, either jointly or individually, if the firm has not registered a business account or has not filed an income tax return in the most recent few years.
    • A copy of the complete winding up application, including all of the LLP's information as well as an explanation of why the firm should be winded up.
    • A copy of the authorization to make the application should have all of the partners' signatures, and the manuscript should be submitted.

    FAQs(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.

    When can a tribunal order the dissolution of a limited liability partnership?

    Motives for a Court to Order a Limited Liability Partnership to Dissolve –

    • If the LLP's Tribunal finds that the LLP must be dissolved.
    • There are fewer than two partners in an LLP, and it has been that way for more than six months.
    • iii) If LLP has financial difficulties and can't pay its bills.
    • If the LLP has done anything that threatens the Sovereignty and Integrity of India, the Security of the State, or Public Order, then it's a big red flag.
    • When the LLP has failed to file a Statement of Account and Solvency or Annual Return with the ROC for five consecutive fiscal years.
    • vi) The Tribunal determines that it is fair and reasonable to dissolve the LLP.

    Who may submit an application to dissolve a LLP with the Tribunal?

    Rule 26 of the Limited Liability Partnership (Winding up and Dissolution) Rules, 2010 permits the following parties to petition the Tribunal for the dissolution of the LLP:

    1. LLP or any of its partners Secured Creditor(s) Companies, Registrar.
    2. Any person approved by the Central Government under Section 51 of the LLP Act, 2008, or the State Government [in the event of Section 64(d)].

    What steps may the Tribunal take after receiving a petition for dissolution of an LLP?

    Rule 27 of the Limited Liability Partnership (Winding Up and Dissolving) Rulings, 2010-
    On receipt of a petition for dissolution of an LLP, the Tribunal is entitled to issue any of the following orders:

    1. Rejection of the petition; Interim Order; Direction to resuscitate or rehabilitate the LLP following Sections 60 to 62 of the 2008 LLP Act;
    2. Appoint a temporary liquidator to finish the company's liquidation procedure;
    3. Order of liquidation of the corporation; Other matters deemed appropriate by the Tribunal.