Limited Liability Partnership (LLP) is a general partnership in which all the partners have limited liabilities. Basically, an LLP is set up under certain legal terms and documents. There is a defined process as to how one can register his/ her LLP. There are some advantages to be in an LLP but at the same time, there are also disadvantages. There are many occasions where people even don’t know how to get an LLP registered, but, most of them do not have an idea that there is a defined process as to how an LLP be closed. In this article, we will be removing such misconceptions and explain the process of how one can close an LLP in India.
The LLP Act, 2008 provides some important guidelines as to how one can close an LLP.
Different methods to close an LLP –
Declaring the LLP Defunct
An application should be made stating that the LLP is no more in functional position or simply is defunct and submit the application to the Registrar. eForm 24 is requisite for filing under Section 37(1)(b) and all the required documents stated in the form is also a major prerequisite for which one is submitting it. After the submission, the name of the LLP is struck off from the LLP’s register.
Winding up the LLP
There are two stages in the winding up process. They are-
1) Winding Up
Winding up of an LLP is regulated by the LLP Act 2008, Sections 63, 64 and 65.
Voluntary winding up
Voluntary winding up happens when the partners decide amongst themselves to discontinue and close the LLP. LLPs can be voluntarily wound-up by passing a resolution with the consent of at least 3/4th of the total number of partners. A replica of the resolution should be filed with the Registrar on Form 1 within the 30 days of passing the resolution. Along with this, a replica of the sanction should be given to the individual who takes care of the process of winding up.
Winding up with creditors
An announcement made by the majority of the partners in Form 2 stating that they have no sum unpaid or they will pay their debts within an assured time period (period fixed by the partners) but not exceeding more than one year from the date of passing of the resolution for the sake of winding up.
Publication of winding up the resolution
After the passing of the resolution for winding up and receiving the consent from the creditors for winding up, then within 14 days, the LLP should give a notice of the resolution by advertisement in a newspaper circulating in the territory where the office is registered or the principal office of the LLP is located.
Appointment of LLP liquidator
With the approval of the majority of the partners, through resolution, voluntary liquidator as the LLP liquidator is appointed with a fixed remuneration. The liquidator will be appointed only after the approval of 2/3rds of the creditors in a value of the LLP.
If the creditors want, then they have a choice to nominate an LLP liquidator and in a case of instantaneous appointments by the creditors and the partners, the LLP liquidator appointed by the creditors will come into existence. If no liquidator is acting, then the Tribunal will be appointing an LLP liquidator.
As soon as the affairs of the LLP are wound-up which means, when liabilities have been discharged and assets have been liquidated, a report will be made by LLP liquidator, in Form 9, stating the way in which the winding up has been conducted, including the final closing of the accounts with all the detailed explanations, and the property which has been disposed of. After this, the approval of the partners and creditors is sought for dissolution.
At the end it can be concluded by saying that closing an LLP is rather a two-way process, one is when one wants to close it and decide to do it and on the other hand when the circumstances make one to do it.
But this process of closing an LLP includes so much big process and so many complications. So, we at Vakilsearch can help you and make this process simple and easy.