Close LLP in India

Limited Liability Partnership or LLP refers to a partnership in business in which all the members or partners have limited liabilities. LLP is always set under legal terms and conditions. There is an organized and defined procedure to register LLP. There are quite a few benefits to be under an agreement of LLP but, it has its fair share of disadvantages too.

A lot of people are confused about the registration process of LLP. However, once registered, most even don’t know the procedure of closing a limited liability partnership.

How you can close your LLP?

Declaring your LLP as inoperative

You will have to submit an application to the registrar in which you will have to mention that your LLP is inoperative of defunct. You will also have to file eForm 24 under Section 37(1)(b). Also, attach all the documents stated in the form with the name of your LLP. After this process, your name will be cancelled from the LLP’s register.

Wind up your LLP

There are two steps involved in winding up your LLP. The first one is winding up of course while the second one is dissolution.

1. Winding Up

• Voluntary Winding Up

  The partners need to decide amongst themselves to wind up the LLP. Once that is done, the following steps can begin:

  The process of winding up your LLPs can begin by passing an approval of minimum of 3/4th of the total number of partners. This is an important step as a copy of the resolution needs to be filed with Registrar on Form 1. The form needs to be filed within 30 days of passing the copy of the authorization and resolution to the person responsible for winding up.

• Winding up with Creditors

  For this you will need

  • A declaration made by the majority number of partners in Form 2 stating that they have no pending debts. If there is an outstanding debt, then they will have to pay the debts within a stipulated time frame specified by the remaining partners. Also, it cannot exceed more than a year from the date of passing the resolution of winding up. The declaration needs to be signed by a minimum of two partners. You will also have to attach a statement which says that you are not winding up the LLP to defraud any person(s). The dues of the creditors should be paid before filing the declaration.
  • A verification of the statement and declaration is needed and it must be filed with Form 3. You will have to file this verification immediately in 15 days after passing the resolution of winding up. The documents that you need to attach with this are:
  • A statement of assets and liabilities starting from the last date of account preparation till the date of the declaration should be attached with Form 4.
  • An evaluation report of the assets

  You will have to send the following to every (secured or unsecured) creditor of the LLP by registered post, speed post or email:

  • A copy of the declaration attached to Form 2
  • The estimated number of claims with an offer to accept those claims

  After this, the creditors should give their opinion in respect with the voluntary winding within 30 days of the receipt of declaration of the LLP.

  
  

  Winding up can become easier when 2/3 of the creditors agree on:

  • The fact that it is beneficial for the partners and creditors to wind up the LLP
  • The LLP is unable to pay all their dues in the form of the proceeds of the assets sold and all the creditors agree with the winding up decision, then it is easy to wrap up everything
  • The LLP is unable to pay all their dues in the form of proceeds of the assets sold and it is beneficial for all the partners and creditors to wind up the LLP by the National Company Law Tribunal, then the LLP has to file an application to the Tribunal for winding up.
  • If the creditors take a decision for the LLP, then that notice needs to be filed with the registrar within 15 days from the date of receipt of the consent in Form 5.
  • If the creditors have no pending dues with the LLP, then their opinion will not matter and the LLP can wind up.

  Publication of winding up resolution

  After the resolution is passed with the consent of creditors for winding up, the LLP needs to give a notice of resolution by advertisement in a newspaper. It needs to be done within 14 days of the resolution passing.

  Appointment of LLP Liquidator

  File the LLP within 30 days of:

  • Passing the resolution of voluntary winding up with no outstanding to the creditors, or
  • Filing a notice of winding up with the consent of the creditors
  • You will have to appoint a voluntary liquidator as the LLP liquidator with the consent of the majority partners through resolution. You will also have to fix his remuneration before the appointment. The appointment of the liquidator is done after the 2/3rd of the creditors give their consent.
  • The creditors can also appoint a LLP liquidator. In case, the partners and creditors choose a different liquidator, then the one appointed by creditors will prevail.
  • If the creditors and partners cannot decide on a liquidator, then the Tribunal can appoint a liquidator.

2. Dissolution

• The process of winding up the LLP includes assets liquidation and completion of liabilities. Once that is done, the LLP liquidator will make a report stating the process of winding up with the final closing of accounts in detail. He will also attach the details of property disposal. All of this is filled with Form 9.
• An approval of resolution needs to be circulated in physical or electronic form. Partners and creditors can ask for clarifications within the 30 day of circulation. They can ask for additional information as well and that has to be provided within 30 days of the receipt.
• The LLP will be wound up if the 2/3rd of the total partners and 2/3rd of the total value of creditors give their consent after reading the report. Once the consent is given, the dissolution procedure must start within 30 days.
• If 2/3rd of partners and creditors do not agree on the report then the LLP liquidator can request the National Company Law Tribunal to make the decision.
• The LLP liquidator must do the following things within 15 days of circulation
• Send a copy of the winding up account with explanations and report in Form 10 to the registrar.
• File an application with the account details and the report in Form 89 to the Tribunal requesting him to pass an order for the dissolution of the LLP.
• If the Tribunal is satisfied, he must pass the order within 60 days of filing the application.
• The LLP Liquidator should then file a copy of the Tribunal’s order to the registrar with Form 11 in 30 days of receiving the receipt.
• Then the Registrar will post a notice stating that the LLP is dissolved in the Official Gazette

Compulsory winding up of LLP

• If the National Company Law Tribunal decides that the LLP should wind up
• If an LLP is less the two partners for a duration of more than 6 months
• If the LLP can’t pay their debts or is at a verge of bankruptcy

An LLP will be considered unable to pay its debts if

• If a creditors outstanding amount is more than 1 lakh and he demands his payment yet he is not paid or provided with adequate security against the payment or his dues are not restructured or compuneded up to his expectations within 21 days of the demand.
• If the order of the court or Tribunal is in the favor of the creditor and that is not adhered to completely.
• If the Tribunal is convinced that the LLP will be unable to pay its debts.
• If the LLP has acted against the security of the state of public order and the national security or sovereignty of India.
• If the LLP has default with the Statement of Account and Solvency or the Registrar. It will also be applicable if they have a default in Annual returns of any 5 consecutive years.
• If the Tribunal has any other legitimate reason to close the LLP.

The application of winding up can be filed by

Any of the partners of the LLP

• Any secured perspective of contingent creditors  Any person authorized by the Central government or the registrar on any grounds excepts the issue of national security  Central government if:  LLP has the intention of defrauding its creditors or partners or anyone associated with them  LLP has an unlawful purpose  They are conducting unfairly prejudicial or oppressive behavior against any of the partners  The company is not abiding by the provisions of the Limited Liability Partnership Act, 2008  Central or State governments

Eligible conversion of Partnership Firm to LLP

Before converting into LLP the partnership firm should be registered under the Indian Partnership Act 1932. It is mandatory to register the firm into the Indian partnership act if the firm is not registered then the name of the statute under which it is registered should be mention at the time of conversion.

Formation of Partnership Firm To Llp

• Digital signature

  The partners of the firm should compulsorily have digital signature because only through digital signature many forms are filled. So partner should already hold a digital signature.

• Digital Tdentification Number

  The partners who have already registered in the partnership firm do not hold any digital identification. DIN is referred to as a unique number issued by the ministry. DIN number is given to an individual only one and he or she can use it throughout his life without any compliance.

• Name Approval

  An individual can apply for the name of LLP through the ministry of corporate Affairs. The reservation for the name of Limited Liability Partnership should be there with you before filing the forms for conversion of partnership firm into LLP.

• Filling of the form

  FILLP is the form that should be filled form for Incorporation of a Limited Liability Partnership. Also in this form, we can fill DIN for 2 partners.

Documents required for Form- Fillip

• Name of Proposed LLP
• DSC of Designated Partners
• Capital of Proposed LLP and Contribution of Partners
• Phone No. and E-Mail Id of Proposed Partners
• Voter ID card/ Passport of the Partners
• Latest Utility Bill
• Registered Office Proof (Possession Letter/ Sale Deed/ Rent Agreement)
• PAN of all Designated Partners
• Bank Statement of Designated Partners

What all attachments are needed with FILLP ?

• Subscriber Sheet Including Consent.
• Proof of Address of Registered Office which should include NOC of the Owner.
• Purpose Main Object.
• Details of LLP if the proposed Designated

The last step is filling of Form-17

It contains the Application and a Statement letter of the Conversion of Partnership Firm into LLP (Limited Liability Partnership). Form17 basically includes a Declaration by a Partner of the Partnership Firm. And should be Digitally Signed by a Partner and Certified by a Company secretary in whole time practice or Chartered accountant in whole time practice.

What all documents should be attached with form-17 ?

• Statement of consent partners of the firm
• Statement of profit and Loss certified as true by the Chartered Accountant.
• Copy of acknowledgement latest income tax return.