LLP CLOSURE

Limited Liability Partnership is a hybrid business entity, which combines the aspects of a partnership and a company having a separate identity from its partners. Limited Liability Partnership closure can be done in two ways:

    • Declaring the Limited Liability Partnership as Defunct
    • Winding up of Limited Liability Partnership

1. DECLARING THE LIMITED LIABILITY PARTNERSHIP AS DEFUNCT

If a Limited Liability Partnership wishes to close down, or if it has not been carrying out any business operations for continuous one year or more, the partnership can be declared defunct. The Limited Liability Partnership needs to make an application to the Registrar for declaring it as defunct. Consequently, the name of the Limited Liability Partnership gets removed from the register of LLPs.

Registrar can strike off a Limited Liability Partnership from the LLP Register. If the Registrar finds out that a Limited Liability Partnership has not been carrying out any business for more than one year, a notice can be sent to the Limited Liability Partnership by the Registrar intimating them of the actions taken and directing to send their representation within one month from the date of the notice. Such notice or content of the application made by the Limited Liability Partnership will be published by the Registrar for a period of one month for the information of the general public. In case no reply is received within the mentioned period, Registrar may strike off the name of LLP.

THE CLOSING PROCESS

    • Convene a meeting of all the designated partners/partners of the Limited Liability Partnership, with agenda in notice.
    • Seek approval from all the partners of the Limited Liability Partnership.
    • Prepare documents for closure of the Limited Liability Partnership.
    • Filling of form to respective state, ROC.

2. WINDING UP OF LIMITED LIABILITY PARTNERSHIP

If the Limited Liability Partnership has liabilities that need to be resolved, all the assets of the business are disposed of to meet the liabilities by winding up the Limited Liability Partnership. If there is any surplus, that will be distributed among the owners. There are two modes by which the winding up of a Limited Liability Partnership is carried out:

    1. Voluntary winding up
    2. Compulsory winding up

Voluntary Winding up: The partners of the Limited Liability Partnership may between themselves decide to stop and wind up the operations of the LLP.

Compulsory winding up – This is when the Tribunal intervenes. There are certain grounds that invite the involvement of the Tribunal. They are:

    • if the Limited Liability Partnership decides that limited liability partnership be wound up by the Tribunal;
    • if the Tribunal is of the opinion that it is fair and reasonable that the Limited Liability Partnership be wound up;
    • if the number of partners of the Limited Liability Partnership is decreased to below two, for a period of more than six months;
    • if the Limited Liability Partnership is unable to pay its debts;
    • if the Limited Liability Partnership has acted against the interests of the sovereignty and integrity of India, the security of the State or public order;
    • if the Limited Liability Partnership has made a default in filing with the Registrar the Statement of Account and Solvency or annual return for any five consecutive financial years.

DOCUMENTS REQUIRED FOR CLOSURE

    • Affidavit by all the Partners
    • Application for closure of Limited Liability Partnership
    • Authorisation Letter
    • Consent of all partners
    • Declaration by all partners
    • Indemnity bond by all partners
    • Statement of accounts
    • Income tax return

Once the Limited Liability Partnership files the application for closure with the ROC, the ROC will verify if the documents submitted are valid. Afterwards, the ROC will publish in the official gazette that the Limited Liability Partnership in question is going to be defunct. If there is any objection from the public, it will be factored into it. If not, the ROC will close the Limited Liability Partnership and will strike its name off from the LLP Register.

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