Winding Of LLP
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Winding up of an LLP is the last stage of bringing an LLP to an end. Various reasons can be there to dissolve an LLP like failing to file the regular compliance, bankruptcy, etc. This process can be initiated voluntarily or by the Tribunal.
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Winding Up of LLP
A Limited Liability Partnership (LLP) is a partnership in which some or all partners have limited liability. It, therefore, exhibits elements of partnerships and company. This type of business entity was introduced in India through the LLP Act, 2008. Winding Up of the LLP can be done voluntarily or by the Tribunal. MCA has amended LLP Rules,2009, by introducing Rules,2017 in which LLP Form 24 has been introduced that will close the LLP by making an application to the Registrar for striking off the name of LLP.
Reasons for Winding Up
- Debt Free
After winding up the LLP and after the liquidation process all the partners are debt-free. - Compliance
If the LLP is not active and there is no revenue generated but the LLP is required to maintain regular compliance. Therefore, winding up of the LLP is advised. - Low Cost
Winding up of an LLP is cheaper than maintaining it As the liquidation process is cheap and it will be according to the sale of the assets. - Fines
An inactive LLP fails to file its regular compliance and then attracts fines and penalties. Therefore it is advised to wind up the LLP.
Ways of Winding Up
- Winding Up Tribunal
- The LLP requests to be wound up.
- In that LLP there are less than two Partners for a period of more than 6 months.
- The LLP is not able to pay its debts.
- The LLP has acted against the interests of the sovereignty and integrity of India, the security of State or public order.
- The LLP has not filed with the Registrar Statement of Accounts and Solvency or LLP Annual Returns for any five consecutive financial years.
- The Tribunal believes that it is just and equitable that the LLP should be wound up.
Winding up of LLP by Tribunal for the following reasons:
- Voluntarily Wind Up
When 3/4th of the total partners give the approval, the LLP can easily be wound up by passing a special resolution. A copy of that resolution should be filed within 30 days of passing the resolution with the Registrar on FORM1. Statement of assets and liabilities should be attached with the declaration for winding up of the LLP. Then LLP appoints a Liquidator to wind up the LLP.
Steps Involved
- Passing of special resolution
- Commencement of winding up
- Declaration on Affidavit that LLP has no debt
- Statement of assets and liabilities
- Report of valuation of assets
- Creditor’s opinion on winding up of LLP within 30 days
- LLP liquidator appointed
- Filing of winding up report by LLP
- Dissolution of LLP will take place
- Publishing in the official Gazette
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