How to Close LLP in India | Procedure to close a LLP
Though LLP Registration is one of the most renowned business entity, there might be several reasons for a limited liability partnership to close down or wind up its business. The companies Act 2013 provides for winding up of a company by way of a petition u/s 272 before the NCLT. The NCLT accept the petition to wind up the business only in the following situations.
• Voluntarily by the 75% majority decision of shareholders.
• In case a threat to the interest of sovereignty and integrity of India.
• If the affairs of the company are conducted fraudulently.
• Non-filing of the financial statement or annual returns the ROC.
• NCLT is of the opinion that it is just or equitable to wind up the company.
Different methods to close an LLP:
There are two different methods to close an LLP that are mentioned below.
• Declare LLP as Defunct: Partners can opt for this method when LLP has not carried operation for a period of 1 year or more.
Eligibility of the Application:
- If a limited liability partnership has not carried on a business or operation for more than 1 year.
- Closure of bank account.
- Authorization of the application by any of the designated partners.
- Acknowledgment of the latest income tax return shall be submitted to the MCA while creating an application.
- Take consent of the parties (partners, creditors, NOC from a registered regulatory authority such as RBI, SEBI, etc.)
Steps for filing an LLP closure application:
- First and foremost an applicant has to file e-form 24 with MCA with relevant docs.
- In the next step, an applicant is required to file a NOC where the LLP is registered with the Regulatory Authority.
- On receiving an application the register would send a notice to the limited liability partnership, of his intention to remove the name of the limited liability partnership from the register and request them to send their representations along with the relevant documents within a one month from the date of the notice.
- The information of sticking off the name is also placed on the MCA website.
- On expiry period of the one month, when no representation is received, a register will pass an order to strike-off the name from the LLP from register.
There are two stages of winding up an LLP.
- Voluntary winding up.
- Compulsory winding up.
An LLP winding up can be initiated voluntary or by compulsory. If an LLP is winding up by voluntary, the LLP must pass a resolution to wind up the LLP with approval of at least three-fourths of the total members of the partners. In case of winding up by compulsory, the LLP is not in a position to repay debts, there must be less than three partners in LLP, the LLP doesn’t file with registrar statement of accounts and solvency or LLP annual returns for five consecutive financial years.
Winding up LLP procedure:
To begin the procedure of winding up LLP, you have to pass the resolution for winding up by taking the approval of three-fourth partners of the LLP. Once you get the approval file a copy at the registrar office within 30 days in form No.1. Please noted that a deceleration of solvency needs to be filled by the majority of the designated partners in form No.2. Verified the affidavit that I am not unable to pay the debt or will be able to repay the debt with one year of commencement of the winding up. This declaration is needed to be filled in form No.3 within 15 days of resolution.
Winding up with the creditors:
The approval of the winding up must be requested from the creditors. Creditors are required to provide their opinion within 30 days of receipt of the request for approval for winding up. The deceleration needs to fill in form 5 within 15 days of receipt of the consent of the creditors. After receiving consent from the creditors, within 14 days notice of voluntary winding up will be published in the newspaper circulating in the district where the registered principle is office is situated.
Winding up with the liquidators:
The LLP liquidator is appointed within 30 days of-
- Passing a resolution of voluntary winding up through a resolution.
- Receiving consent of creditors.
With the approval of the majority of the partners, through resolution, voluntary liquidator as the LLP liquidity is appointed with fixed remuneration. A liquidator must be appointed within thirty days of passing of a resolution of voluntary winding up through a resolution. But, if the consent of 2/3 creditors is not received may appoint another liquidator and fix the remuneration and liquidator appointed by the creditors will be liquidator.
The liquidator after his appointment, he has to file a Form No.6 disclosing conflict of interest and lack of independence if any of partners or creditors as the case may be. While discharging his duty, the liquidator is required to maintain proper books of account of pertaining to the winding up of the LLP. The cost of the expenses of liquidator of winding up an LLP is paid out of assets of LLP and will have priority over all other claims.
In a nutshell, it can be said that, if partners want to wind up LLP, they are required to satisfy the above-mentioned process. In the event, if you feel difficulty while winding up LLP, you can take the help of an advisory firm. At Unilex Business consultant, we will help you in regarding winding up an LLP. All you need is to do just share your companies details with us through phone or email or you can reach our office, we will guide in a better way.