Process for Closure of LLP

Last Updated On: May 26, 2020, 8:12 p.m.
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CLOSURE OF LLP

Limited Liability Partnership is a general partnership where all partners have limited liabilities. According to section 3 of the Limited Liability Partnership (LLP) Act, 2008, An LLP is a corporate body which is formed and Incorporated. It is a legal entity separate from its partner. There is a defined process to register/ close an LLP. The process of closing an LLP is explained below.

As per rule 37 of LLP act, 2009:

  • If the Limited Liability Partnership is not carrying its business or operation,
  • In case of two or more years and the registrar has reasonable cause, Suo Motu action can be taken for striking the name of defunct LLP.
  • In case of one year or more and has made application to the registrar, in the consent of all the partners in the limited liability strike of the name of the LLP in the registrar.

There are different methods of Closing a Limited Liability Partnership (LLP):

A.WINDING UP OF LLP

There are 2 types of winding up of LLP:

a.Voluntary Winding-up:

  • Resolution and Affidavit:
  • Pass a resolution with the consent of at least 3-4 of all the partners
  • A replica of resolution should be with the form of ROC on form 1 within 30 days of passing the resolution.
  • Winding up with Creditors:
  • Filing form2 stating that there is no sum unpaid and will pay their debts within one year or assured period of time from the date of passing the resolution.
  • Appointment of LLP Liquidator:
  • Appoint a liquidator for liquidation and LLP’s Liabilities and partner rights. Pass a resolution approving the report filed by the LLP Liquidator for winding of the LLP.
  • Publication of winding up the resolution:
  • The LLP should give a notice of resolution by advertising in newspaper circulation in the territory where the LLP is located.
  • Compulsory Winding up.    
  • Dissolution.
  • A report will be made by the liquidator form 9.
  • The approval of partners and creditors is sought for dissolution.

b.Compulsory winding up:

    A company or limited liability partnership (LLP) can be put into compulsory liquidation if it cannot pay its debts.

    Circumstances where LLP can be wound up by compulsorily by the tribunal:

  • If the no. of partners of LLP is reduced below 2, for a period of more than 6 months.
  • If the Tribunal is of the opinion that it is just and equitable that the LLP should be wound up.
  • If the LLP is unable to repay its debts.
  • If the LLP has made a mistake in filing with the Registrar a Statement of Account and Solvency for any 5 consecutive financial years.

B.Declare as Defunct:

When LLP is not carrying its business or operation for more than one year LLP is declared a defunct

STEPS FOR FILING APPLICATION:

  • The applicant should file form24 with MCA with requisite documents.
  • Where the LLP is registered with the Regulatory Authority, NOC has to be filed.
  • ROC file the information on its website for a period of one month for information of the general public and receive the representation.
  • On the expiry of one month, when no representation is received, ROC will pass an order to strike off the name of LLP from the register.

      Eligibility for the Application:

  • Cease of Operation one year or more.
  • Closure of Bank Account.
  • Obtain Consent of at least 2-3 partners.
  • Complied with the annual compliances for the period up to its carried.
  • A statement of Assets and Liabilities should be prepared, and should be certified by the auditor or CA.
  • Acknowledgment of present year Income tax returns to be furnished to MCA while making an application.

    LLP’s closure benefits:

     In case a Limited Liability Partnership defaults in filling any statutory return, a penalty of Rs.100 per day is charged

     By Striking off LLP you can avoid filing form 11 and LLP form 8 and Income tax for the financial year.

     No need to pay Overdue to the concerned registrar along with the payment of rs.100 per day.

     MCA has given relaxation to LLP’s that in the period of not carrying their business or operations they need not file.

    Frequently Asked Questions About Closure Of LLP:

     1. What is a Limited Liability Partnership?

     Ans. A Limited Liability Partnership(LLP) is a partnership where some or all the partners have limited liability. LLP is an alternative corporate entity type that gives the benefits of limited liability of a company and the flexibility of a  partnership.

     2. When do I need to close LLP?

     Ans: An LLP needs to be closed on the following condition:

  • LLP is inoperative from the date of incorporation or inactive period of at least one year LLP does not have any assets/liabilities as on the date of application.

     3. Which companies will not be qualified for provisions of strike off?

      Ans: The following companies do not qualify for provision of strike off:

  • Listed companies.
  • Companies De-listed on account of non-compliance of listing regulations, listing agreement, or any statutory body.
  • Vanishing companies.
  • Companies that have been listed for inspection or investigation –if such a directive has been carried out/pending/completed but the prosecution concerning such inspection or investigation is pending under the court law.
  • Companies that have not yet responded to the notice of selected provisions.
  • Companies that have not furnished its follow up instructions on any report under section 208 of the Act.
  • If the prosecutions related to the above two provisions are pending in a Court of law.
  • Companies against which any case for the prosecution is pending in the court of law.
  • Companies whose application is compounding, pending before the competent authority compounding the offenses committed by it or any of its officers in default.
  • Companies accepting any public deposits which are outstanding.
  • Companies having any charges which remain to be satisfied.
  • Companies registered under section 25 of the Companies Act.1956 or section 8 of the Act.

     4. What is the use of E-Form 24?

    Ans: E-form is used to make an application with ROC for striking off the name of LLP.

     5. What is a strike-off procedure for LLP?

    Ans. In case of the LLP wants to close down its business or where it is not carrying on any business operations for a period of one or more year, it can make an application to the ROC for declaring the company as defunct and removing the name of the LLP from its register of LLP. The name of LLP can be struck off by the registrar or by the LLP in e-form 24 with the consent of all partners. On receiving the application, the registrar would send a notice to the Limited Liability Partnership and all its partners, of his intention to remove the name of LLP from the register and requesting them to send their representations along with copies of the relevant documents, if any, within a period of 30 days from the date of the notice. On completion of the time mentioned in the notice, if there are no advances representations from LLP partners or the general public, the registrar could if satisfies, strike off the LLP name from the register and publish a notice in the official gazette. 
 

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