A Limited Liability Partnership is a general partnership with limited liabilities for each partner. In accordance with section 3 of the Limited Liability Partnership (LLP) Act, 2008, an LLP is a corporation formed and incorporated. It is a separate legal entity from its partner. The process of registering/closing an LLP is defined. Below is a description of the process of closing an LLP.
According to rule 37 of the LLP act, 2009:
- When the Limited Liability Partnership is not operating,
- When a company has been defunct for two or more years and the registrar can demonstrate reasonable cause, Suo Motu action can be taken to strike the company’s name.
- If the LLP has been in existence for one year or more and has made an application to the registrar, the name of the LLP will be struck in the register with the consent of all partners.
Limited Liability Partnerships (LLPs) can be closed in various ways:
LLP Winding Up
A LLP can wind up in two ways:
The voluntary winding-up:
- Affidavit and Resolution:
- With the consent of at least 3-4 of the partners, pass a resolution
- After passing the resolution, a replica should accompany the ROC on form 1.
- Creditors’ winding up:
- Filing form 2 stating that there is no sum unpaid and that they will pay their debts within one year or an assurance period of time after passing the resolution.
- Liquidator appointed for LLP:
- Liquidate the LLP’s liabilities and partner rights and appoint a liquidator. Pass a resolution approving the LLP Liquidator’s report for winding up the LLP.
- Publication of the winding up resolution:
- A notice of resolution should be published in a local newspaper in the LLP’s territory.
- Winding up compulsory.
- Liquidation.
- Liquidator will make a form 9 report.
- Dissolution requires the approval of partners and creditors.
Liquidation:
Companies and limited liability partnerships (LLPs) can be forced into compulsory liquidation if they cannot pay their debts.
LLPs can be wound up compulsory by the tribunal in the following circumstances:
- The number of partners of an LLP is reduced to less than 2 for a period of more than 6 months.
- When the Tribunal deems it just and equitable to wind up the LLP.
- If the LLP cannot pay its debts.
- If the LLP has failed to file a Statement of Account and Solvency for any five consecutive financial years with the Registrar.
B. Declare as Defunct:
An LLP that ceases to operate for more than a year is declared defunct
STEPS FOR FILING APPLICATION:
- The applicant should file form 24 with MCA along with the requisite documents.
- If the LLP is registered with the Regulatory Authority, a NOC must be filed.
- For one month, ROC posts information on its website for the general public’s information and receives representations.
- Once one month has expired without representation, ROC will strike off LLP’s name from the register if no representation is received.
Application Eligibility:
- End of operation after one year.
- Closure of the bank account.
- Obtain the consent of at least 2-3 partners.
- Complied with the annual compliances up to its date.
- An asset and liability statement should be prepared and certified by an auditor or certified public accountant.
- An acknowledgement of income tax returns for the current year must be provided to MCA when making an application.
LLP’s Closure Benefits:
Limited Liability Partnerships who fail to file their statutory returns are subject to a penalty of Rs.100 per day
By striking off LLP, you can avoid filing LLP forms 11 and 8, as well as income tax.
There is no need to pay Overdue along with the daily fee of Rs. 100 to the concerned registrar.
According to MCA, LLP’s do not need to file while not carrying on their business or operations.
Read more
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