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Closure Of LLP
Limited Liability Partnership is a business entity that is registered with MCA and governed under LLP Act, 2008. There are many situations where the owner of the LLP has to close their business. In the LLP Act, there is a process for closure of the LLP which the partners of the LLP have to follow. The LLP cannot get closed only by the mutual consent of the partners, the approval from the registrar is also required. It is very easy to incorporate the LLP as the complete procedure is online and like the incorporation procedure, the closing of the LLP procedure is also online. In 2017 form-24 for strike off of LLP has been introduced under the Limited Liability Partnership (Amendment) Rules, 2017 by the government to make the closing of the LLP procedure simple.
There are many reasons for the closure of any business like:
- Non- commencement or non-operation of business
- Losses are more than assets
- Dispute between the management
- Declared as insolvent and unable to pay its debt
- Death of managerial personal
- Lack of funding; many other reasons
There are two types of closure of LLP one is Voluntary closure and the second one is compulsory closure.
Compulsory closure or winding up:
Under this, the NCLT (National Company Law Tribunal) can file the application for the winding up of LLP. The following conditions are where the application can be filed by the NCLT to the registrar:
- If the number of partners is reduced below the prescribed limit (i.e., 2) for more than 6 months
- If the LLP has failed to file the annual return and statement of accounts for 5 consecutive years
- If NCLT satisfied that the LLP is acting against the national interest or sovereignty or integrity of India or doing any illegal or prohibited activities or the activity is against the security of the state or public or it is against any class of citizen or religion, etc.
Voluntary winding up:
If any LLP doesn’t carry the business activity for one year or more then it can apply for closing LLP to the ROC for declaring the LLP as defunct and removing its name from the register of LLP. Under voluntary winding up the application for closure of LLP is filed by the partners after passing a resolution in the meeting. In the voluntary winding, the closure procedure has two steps one is winding up and the second one is dissolution. In this case, the partners must agree to close the LLP and a resolution must be passed for this and within 30 days from passing the resolution an application shall be filed to the ROC with all the documents and fees.
Procedure for Closing The LLP
- Take the consent of the partner in the meeting of the LLP and pass the resolution for closure of LLP. At least 3/4th of the partners must be agreed with this proposal
- Close the bank account, if opened and obtain the certificate or letter of closure of the bank account from the bank
- All the partners must have to execute an affidavit and declaration stating that the LLP:
- Does not carry any business activity
- Does not have any creditors
- LLP has no liabilities or debt
- No litigation is pending against the LLP
- No case is pending in court or tribunal against the LLP, etc.
- The LLP also has to file an income tax return
- Obtain NOC from the special authority (SEBI, RBI, Stock Exchange, etc.) if the LLP is registered with these authorities as well.
- File form-24 along with all the documents and fees within 30 days from passing the resolution.
- If the registrar is satisfied with the application then he will publish the notice for closure of LLP on the website for one month
- After one month he may issue an order for strike off of the LLP and after this order, the same will be published in the official gazette and on the publication of this notice, the LLP shall stand dissolved.
Documents Required To Close LLP
- Copy of resolution (partner’s consent for strike off of the LLP)
- Consent and list of creditors, if LLP have creditors
- Bank account cancellation certificate or letter
- Affidavit from all the partners
- Copy of declaration from the partners
- Indemnity bond
- Copy of litigation pending against the LLP
- Latest Income tax return copy
- Statement of assets and liabilities duly certified by the chartered accountant
- NOC from the special regulatory authority (SEBI, RBI, Stock Exchange, IRDA, etc.) if applicable
- Digital signature of existing designated partner.
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Frequently Asked Questions
The following persons can file an application for striking off of the LLP to the registrar:
- The partners with the consent of all partner
- By the NCLT
- By the creditors of the LLP, if the LLP fails to pay their debt.
An application for strike off is filed in form-24 along with all the required documents and fees.
After passing the resolution in the meeting of the partners for closure of LLP then the form-24 shall be filed to the registrar within 30 days from the date of passing the resolution.
The grounds for closure of LLP are:
- Non-operational of business
- LLP is inoperative or inactive from the date of registration for at least one year.
- LLP doesn’t have any asset or liability
- With the consent of partner by passing a resolution
- The dispute in the management
- Non-filing of annual return and statement of accounts for a consecutive period of 5 years.
- Doing or operating any business which is against the national interest.
No, any application for closure of LLP can’t be filed without the consent of the partners. At least 3/4th of the partners must agree to the closure of LLP
There are two stages for closure of LLP: