Company IncorporationLLP

How to Close a Limited Liability Partnership In India?

Did you know that there is a specific procedure for registering and winding up one's LLP? In this article, we will dispel common myths and explain how to close an LLP in India.

A limited Liability Partnership (LLP) is like a general partnership in which all the partners have limited liabilities. Basically, an LLP is set up under certain legal rules and regulations more complex than those applicable to a traditional partnership. So, the procedure to close an LLP is also more streamlined than partnerships.

Being a member of an LLP has some benefits, but it also has some drawbacks. While there are many instances where people do not know how to register an LLP, there are even more instances wherein LLP partners are unaware that there is a specified process for closing an LLP. 

To explain away this very confusion, the team of Vakilsearch has put together this step-by-step guide.

The LLP Act, 2008 provides some important guidelines as to how one can close an LLP. The different methods to close an LLP are as follows –

1. Declaring the LLP Defunct

An application should be submitted to the Registrar declaring that the LLP is no longer in a functional position or is simply defunct. eForm 24 is required for filing under Section 37(1)(b), and all of the required papers listed on the form are also a major requirement for submitting it. After the submission, the name of the Limited Liability Partnership is struck off from the LLP register.

2. Voluntary Winding Up of an LLP

Unlike declaring defunct, the procedure to close an LLP in India voluntarily is a little longer.

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 with the consent of at least 3/4th of the total number of partners. Form 1 must be filed with the Registrar within 30 days of the resolution being passed. 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

Thereafter an announcement must be made by the majority of the partners in Form 2. It should state 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

After the passing, within 14 days, the Limited Liability Partnership should give a notice by advertisement in a newspaper. It can be either the one circulating in the territory where the office is registered or the principal office of the LLP is located.

Appointment of Limited Liability Partnership liquidator

With the approval of the majority of the partners, an LLP liquidator is appointed with fixed remuneration. The liquidator will be appointed only after the approval of 2/3rds of the creditors by the value of the LLP.

If the creditors want, then they have a choice to nominate an LLP liquidator. In the case of simultaneous appointments by the creditors and the partners, the LLP liquidator appointed by the creditors will be eligible. If no liquidator is acting, then the Tribunal will be appointing an LLP liquidator.

Dissolution

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 the LLP liquidator, in Form 9. This will state the way in which the winding-up has been conducted. It will include 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.

Conclusion

To sum up, it can be stated that closing an LLP can be done in two ways. One is when partners themselves want to close it and decide to do so, and the other is when circumstances force partners to do so.

However, the procedure to close an LLP entails a large number of steps and complexities. This is why we recommended that you engage the services of professionals with expertise in the field. Thankfully, we at Vakilsearch can assist you in making this entire process quick and straightforward. Get in touch with our experts today!

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