In a limited liability partnership, all partners have limited liability. In general, an LLP is organized under legal terms. LLP registration follows a defined procedure. In an LLP, you have some benefits, but there are also some disadvantages. Additionally, closing an LLP requires many steps. Therefore, many people are confused about how to register their LLP. However, most people are not aware that an LLP must be closed according to a specific procedure.
LLP Closure Steps
1. Declaring your LLP inactive
The Registrar should receive an application from any partner stating that the registered Limited Liability Partnership is no longer functional or simply defunct. In accordance with Section 37(1)(b) of the Companies Act, 2013, the partners are required to file an e-Form 24. All documents listed in the form must be attached to the form as a major requirement. A LLP’s name will be struck off its register.
2.Winding up your LLP
An LLP closes in two stages: liquidation and winding up.
An LLP’s winding up process is governed by Sections 63, 64, and 65 of the LLP Act 2008. LLPs can be wound up in two ways. They are as follows:
Voluntary winding up
When partners decide to close the LLP. It is possible to close an LLP voluntarily by passing a resolution with the approval of at least 3/4th of the partners. Within 30 days of passing the resolution, a copy of the resolution must be filed with the Registrar on Form 1. Copy of the authorization given to the person who takes care of the LLP’s winding up.
Winding up with creditors
In Form 2, at least 2 partners must declare that they have no debts or they will pay their debts within a certain period of time. Within one year of passing the resolution for winding up. In order for this statement to be valid, at least two partners must sign it. Additionally, it must state that the LLP is not being wound-up in order to defraud anyone. Before filing a declaration, creditors can pay their dues.
The verification of the declaration and statement must be filed on Form 3 within 15 days of the date of passing the resolution for winding up. Documents that must be filed include:
(a) Statements of assets and liabilities (from the last date the accounts were prepared to the latest practicable date immediately before the declaration) must be filed in Form 4.
(b) An asset valuation report with a value.
The following information must be sent to all creditors, whether secured or unsecured, of the LLP:
(a) A copy of the declaration on Form 2.
(b) An estimate of the amount of claims due and an offer to accept the claims.
Closure of LLP
- A Limited Liability Partnership liquidator will provide a report on how the winding-up process has been conducted, including a final closing of accounts and explanations, and how the property has been disposed of, when the LLP’s affairs are wound-up, or when assets have been liquidated and liabilities have been discharged. After that, he will seek approval from the partners and creditors for the dissolution.
- In order for a resolution to be approved, it needs to be circulated, whether in physical or electronic form. Within 30 days of the distribution, partners and creditors can ask for clarification. If further information is required, it must be provided within 30 days of receipt.
- A resolution for dissolution must be passed within 30 days of the receipt of the report and the winding up accounts, or within 30 days of the circulation of the resolution or further information, whichever is later, if 2/3rds of the total number of partners or 2/3rds of the value of creditors are convinced the LLP should be wound up.
- LLP liquidators must apply to the National Company Law Tribunal for a decision if they cannot achieve the requisite 2/3 of approval for the report.