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Winding Up - LLP

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LLP winding up is a legal process for closing a dormant or inactive LLP by “striking off” its name from the register. This is done through MCA compliance, primarily by filing Form 24.

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Winding Up Of LLP

LLP winding up is the formal legal process of closing down a Limited Liability Partnership by selling its assets and settling all debts and liabilities. This is a crucial step to legally dissolve the LLP and remove its name from the Register of Companies. The process is governed by the LLP Act, 2008, and the Insolvency and Bankruptcy Code (IBC), 2016.

Modes of LLP Winding Up

The dissolution of an LLP can be initiated through two primary methods:

1. Voluntary Winding Up

This is the most common method, initiated when the partners of the LLP decide to cease business operations. It requires a formal declaration of solvency, confirming that the LLP has enough assets to pay all its debts. A liquidator is then appointed to manage the sale of assets and payment of creditors.

2. Compulsory Winding Up

A tribunal, such as the National Company Law Tribunal (NCLT), can order the winding up of an LLP under certain circumstances. These include:

  • The LLP having fewer than two partners for six months.
  • The LLP being unable to pay its debts.
  • The LLP failing to file its annual returns and solvency statements for five consecutive years.

Key Steps for Voluntary Winding Up

The LLP winding up process involves several key stages to ensure all legal obligations are met:

  1. Declaration of Solvency: The designated partners must provide a declaration, supported by an affidavit, stating the LLP’s ability to pay its debts in full from the proceeds of its assets. This declaration must be accompanied by audited financial statements.
  2. Passing a Resolution: The partners must pass a formal resolution to voluntarily liquidate the LLP and appoint a liquidator. If the LLP has creditors, they must approve this resolution.
  3. Appointing a Liquidator: A qualified insolvency professional is appointed to take control of the LLP’s affairs. The liquidator’s role is to sell assets, verify creditor claims, and pay off all liabilities.
  4. Final Report and Dissolution: After all debts are settled and any remaining assets are distributed among partners, the liquidator submits a final report to the Registrar of Companies. The LLP’s name is then removed from the register, officially completing the dissolution of the LLP.

Simplify Your LLP Closure with FileMyFirm

The winding up LLP process can be complex, involving numerous legal formalities and filings. FileMyFirm provides end-to-end services to assist with the voluntary liquidation of an LLP. Our experts guide you through every step, from preparing the declaration of solvency to filing the final reports, ensuring a smooth and compliant LLP closure.

Frequestly asked questions ( FAQ )

What does "Winding Up" or "Closure" of an LLP mean?

Winding Up is the formal legal process of closing down a Limited Liability Partnership. It involves settling the LLP’s liabilities, disposing of its assets, and ultimately dissolving the entity, leading to its name being “struck off” from the register maintained by the Ministry of Corporate Affairs (MCA).

 

 

Which MCA form is mandatory for the "Striking Off" closure process?

For an inactive LLP seeking closure through the simplified “striking off” method, the mandatory form to be filed with the MCA is Form 24 (Application for Striking Off the Name of LLP).

 

 

What are the primary conditions for applying for "Striking Off" via Form 24?

The LLP must generally meet the following conditions to file Form 24:

  • It must have ceased all commercial activities for at least one year.

  • It should not have any assets or liabilities.

  • It must have filed all mandatory overdue returns (e.g., Form 8 and Form 11) up to the date it ceased commercial operations.

What are the key consequences of completing the LLP winding-up process?

Once the winding-up process is complete and the LLP’s name is officially struck off by the ROC:

  • The LLP ceases to exist as a legal entity.

  • The Designated Partners are relieved of future legal and compliance obligations related to the LLP.

  • Any person who continues to carry on business under the name of the LLP may face penalties.

What are the consequences of late or non-filing of Form ADT-1?

Failure to file Form ADT-1 within the 15-day deadline results in statutory late fees (penalties). The penalty fees escalate significantly based on the duration of the delay, ranging from 2 times the normal government fee for shorter delays up to 12 times the normal fee for delays exceeding 180 days.