Winding up of LLP
An inactive or dormant LLP can be wound up to avoid annual compliance formalities and the penalty for non-compliance.
Introduction
An LLP winding up can be initiated voluntarily or by striking off or by a Tribunal. If an LLP is to initiate winding up voluntarily, then the LLP must pass a resolution to wind up the LLP with the approval of at least three-fourths of the total number of Partners. If the LLP has lender’s, secured or unsecured, then the approval of the lenders would also be required for winding up of the LLP.
To begin the process for winding up of LLP, a resolution for winding up of LLP must be passed and filed with the Registrar within 30 days of the passing of the resolution. On the date of passing of a resolution of winding up of LLP, the voluntary winding up shall be deemed to commence.
Voluntary Winding up
LLPs can also be wound-up easily with the approval of 3/4th of the partners. To start the liquidation process for an LLP, a greater part of the designated partners will have to make a declaration that the LLP has no debt or that it will be competent to pay the debts in full within a period of not more than 1 year from the start of winding up. Further, the LLP partners must declare that the LLP is not being wound up to defraud any person or persons. This declaration for winding up of the LLP must be prepared along with a statement of assets and liabilities until the most recent practicable date right before the making of declaration for winding up. A valuation of the assets related to the LLP prepared by a valued must also be submitted if there are assets in LLP. Voluntary winding up will be deemed to start on the date of passing of the resolution for the reason of voluntary winding up.
Striking Off
The Ministry of Corporate Affairs has recently amended Limited Liability Partnership Rules, 2009 by introducing the Limited Liability Partnership (Amendment) Rules, 2017 with effect from 20th May 2017. With this amendment, LLP Form 24 has been introduced by the MCA and it is now possible to easily close an LLP by making an application to the Registrar for striking off the name of LLP. Before the introduction of the Limited Liability Partnership (Amendment) Rules, 2017, the procedure for winding up an LLP used to be long and cumbersome. However, with the introduction of LLP Form 24, the procedure has been made easy and simple.
Winding up by Tribunal
Winding up of LLP can be initiated by a Tribunal for the following reasons:
- The LLP wants to be wound up.
- There are less than two Partners in the LLP for a period of more than 6 months.
- The LLP is not in a position to pay its debts.
- The LLP has acted against the interests of the sovereignty and integrity of
- India, the security of State or public order.
- The LLP has not filed with the Registrar Statement of Accounts and Solvency or LLP Annual Returns for any five consecutive financial years.
- The Tribunal is of the opinion that it is just and equitable that the LLP should be wound up.
Reasons to Wind up LLP
Avoid Compliance
An LLP is a legal entity and a juristic person requiring regular maintenance of compliance throughout its lifecycle. LLP winding up can be used close an LLP that is not active and avoids compliance responsibilities.
Avoid Fines
An LLP that doesn’t file its compliance on time incurs fines and penalty, including debarment of the Partners from starting another LLP or Company.
Additional Director
Additional Director is someone appointed by the Board of Directors between two annual general meetings subject to the provisions of the Articles of Association of a company. Additional Directors can hold office only up to the date of the next annual general meeting of the Company.
Low Cost
LLPs can be wound up easily through IndiaFilings for just Rs.15899. On the other hand, a dormant LLP or non-compliant LLP could potentially acquire more penalty, if compliance is not maintained every year.
Easy to close
The formalities for winding up of a dormant LLP are relatively simple and easy to complete. Hence, its best to close an inactive LLP at the earliest.
Easy Process
The Ministry of Corporate Affairs has simplified the process for liquidation or winding up of LLP through various initiatives. Hence, akin to incorporation, an LLP can be wound up easily with the minimal procedural requirement.
How we Process Winding up the LLP
Document Preparation
A Business Expert reviews the activities of the LLP and determines the documents required for commencing LLP winding up. The review process would be complete in 2 – 3 working days.
Document Submission
The necessary documents are prepared by an Expert for winding up of the LLP. Documents will be prepared by the Expert in 10 – 15 working days, based on the documents and information provided.
Winding up Process
LLP winding up documents and application is submitted to begin the process. Throughout the process, the application is tracked and necessary filings are made to wind up affairs of the LLP.
Wind up an LLP
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