Winding Up or Closing a Limited Liability Partnership
Winding up or closing a limited liability partnership (LLP) company in India is to be made strictly as per the provisions given in the Sections 63-65 of the Indian LLP Act of 2008. Again, this winding up of an LLP may be voluntarily or compulsorily (by a Tribunal or Court).
In the voluntary winding up, the partners of the LLP themselves decide that the business operations of their firm should be stopped, closing the LLP formally. On the other hand, an LLP may be wound up compulsorily under certain circumstances by the order of a tribunal (an institution with the authority to judge and intervene or determine claims) or court. The forced winding up of an LLP may be caused by any of the following reasons:
- The LLP desires to be wound up
- Absence of the minimum number of prescribed partners (which is Two) for over Six months.
- The LLP is unable to pay off its debts, or is at the brink of getting bankrupt.
- Failure of the LLP in filing the Statement of Accounts and Solvency or the Annual Returns with the Registrar for any Five consecutive Financial Years.
- The LLP being against the integrity and sovereignty of India, or the security of State or Public Order.
- Rigorous order of a tribunal that the LLP must be wound up based on the specified just and equitable reasons.
What Documents are Required to Close a Limited Liability Partnership
The various documents required to close a limited liability partnership firm in India, are the following in general:
- A Board Resolution in favor of winding up
- Consent Letter of the Creditors
- Report regarding the current valuation of the assets of the LLP, by a recognized Valuer
- Statement of Accounts
- Statement of Assets, Liabilities, Debts, etc. of the LLP at the time of closure
- Affidavits from the Designated Partners
- Indemnity Bonds
How to Close an LLP Company - Procedure to Close an LLP Company
The general procedure to close an LLP company in India, involves the following processes or steps:
- The LLP must pass a resolution in favor of its winding up with approval of at least 3/4th of its total number of partners. This resolution should also be supported by at least 2/3rd of its creditors in value.
- Within 15 days of passing such a resolution a declaration in an affidavit duly signed by the majority of the designated partners of the LLP, should be submitted to the Registrar. This declaration must clarify that the LLP has no debts, or if there are some debts, the LLP is able to pay off those in full through sale of its assets, in a maximum of one year period, counted from the date of the commencement of winding up. A copy of the resolution for winding up is to be submitted to the Registrar within 30 Days of passing the same.
- Within Two Weeks of the receipt of the consent of sufficient creditors in favor of the resolution of winding up, the LLP is required to advertise its notice of resolution in a newspaper which is widely read in the region where the registered office of the LLP is located.
- Within 30 days of receiving creditors' consent, the designated partners are then required to appoint a Liquidator to carry out the necessary processes of winding up, along with maintaining proper books of accounts. Then, the Liquidator is required to submit the report together with the resolution to the Registrar, and file an application for winding up to the Tribunal. Submission of other documents mentioned above, is also to be made.
- In case the Tribunal gets satisfied with the processing of winding up and necessary accounts, then it will pass the permission for dissolution of the LLP. Then, the liquidator needs to file the order of Tribunal with the Registrar along with an application requesting winding up. Finally, the Registrar will publish a notice in the Official Gazette regarding the dissolution of the said LLP.