Winding up of an LLP

Voluntary Winding-Up of an LLP:

The process of winding up an LLP voluntarily can be initiated with the approval of 3/4th of the partners. The designated partners must begin the liquidation process by declaring that the LLP has no outstanding debts or that any existing debts will be fully settled within one year from the commencement of the winding-up process.

Additionally, the LLP partners must assert that the winding up is not a result of fraudulent activities. This declaration, along with a statement of the assets and liabilities up to the most recent practical date before the winding-up declaration, should be prepared.

A valuation of relevant LLP assets, if any, must also be compiled and submitted. The effective date of voluntary winding up is considered the start date of passing the resolution for this purpose.

Procedure for Winding Up an LLP:

To initiate the winding-up process, a resolution must be passed and filed with the registrar within 30 days. The commencement date is deemed to be the date of passing the resolution. Subsequently, a majority of partners must submit a verified declaration by affidavit stating that the LLP has no debts or will settle them within the specified period (not exceeding one year from the commencement date).

Within 15 days of passing the resolution, the following documents must be filed with the registrar:

Report of the valuation of LLP assets, if applicable.

Winding Up with Creditors:

A Form 2 declaration, confirming the absence of unpaid sums or the commitment to clear debts within a specified period (not exceeding one year), is required from the majority of partners.

Publication of the Resolution:

Within 14 days of passing the resolution and obtaining consent from creditors, the LLP must publish an advertisement regarding the winding-up resolution in a locally circulated newspaper.

Appointment of the LLP Liquidator:

Upon obtaining approval through a resolution from a majority of partners, an LLP liquidator is appointed, with a fixed remuneration. This appointment is contingent on the approval of 2/3rd of creditors in the value of the LLP. Creditors also have the option to nominate an LLP liquidator.

Filing of Winding Up by a Liquidator:

After fully winding up the affairs of the LLP, the LLP liquidator prepares a report detailing the winding-up process and the disposal of LLP property. If two-thirds of the partners and creditors, in value, are satisfied with the report, a resolution for winding up the accounts and explaining the dissolution must be passed by the partners. The LLP liquidator submits this winding-up report, along with the resolution, to the Registrar and files an application with the tribunal.

Dissolution:

Upon completion of winding up the affairs of the LLP, the LLP liquidator generates a report in Form 9. This report signifies the discharge of LLP liabilities, liquidation of assets, and provides a detailed account closure along with explanations and information on the disposed-of property. The approval of partners and the solicitation of creditors for dissolution follow this process.

In essence, the closure of an LLP is a nuanced two-fold process, wherein a deliberate decision to wind up the LLP is coupled with external circumstances that may necessitate such action.

Striking Off:

The Limited Liability Partnership Rules, 2009 underwent a recent amendment with the introduction of the Limited Liability Partnership Rules, 2017, effective from May 20, 2017. As part of this amendment, the Ministry of Corporate Affairs (MCA) introduced LLP Form 24, simplifying the process of winding up an LLP by allowing an application to the Registrar for striking off the name of the LLP.

Before the implementation of these revised rules, the winding-up procedure for an LLP was notably prolonged and cumbersome. The introduction of LLP Form 24 under the new amendment has streamlined the entire process, making it more straightforward and efficient.

Post-Winding Up of an LLP:

During the winding-up process, a company is generally prohibited from conducting its regular business activities, unless it is necessary for the completion of liquidation and asset distribution. At the conclusion of the winding-up process, the company undergoes dissolution, leading to the effective cessation of the LLP’s existence.

Dissolution:

Upon the conclusion of winding up the affairs of the LLP, the LLP liquidator promptly generates a report. The discharge of LLP liabilities, liquidation of assets, and the overall status are documented in Form 9 by the LLP liquidator. This comprehensive form details the winding-up process, including the final closure of accounts, a thorough explanation, and a record of disposed assets. After obtaining approval from partners, creditors are approached for the formal dissolution process.

In essence, closing an LLP is a two-fold process where the decision to wind up the LLP is deliberate, combined with external circumstances that may necessitate such action.

Striking Off:

The Limited Liability Partnership Rules, 2009 underwent a recent amendment with the introduction of the Limited Liability Partnership Rules, 2017, effective from May 20, 2017. This amendment introduced LLP Form 24 by the Ministry of Corporate Affairs (MCA), simplifying the LLP winding-up process through a streamlined application to the Registrar for striking off the LLP’s name.

Before the implementation of these revised rules, winding up an LLP involved a lengthy and cumbersome procedure. The introduction of LLP Form 24 under the new amendment has streamlined the entire process, making it considerably more straightforward and efficient.

Post-Winding Up of an LLP:

During the winding-up process, a company is generally restricted from engaging in its regular business activities, except in cases where the LLP needs to complete the liquidation and distribution of assets. Ultimately, as the winding-up process concludes, the company undergoes dissolution, leading to the effective cessation of the LLP’s existence