Closure of LLP In India
As an LLP is a creation of law, it can be closed by procedures established by statute only. The reasons for closure could be many. However, the circumstances in which an LLP is being closed is what matters for the process which needs to be adopted.
A business may be required to be closed due to various reasons, like non-operation, closure of business, recurring losses, the passing of the key managerial person, the dispute among promoters, un-ability to pay debts of the LLP, etc. Closing or winding up of an LLP is a challenging task, where the designated partners and all partners must first decide on the best method available under the LLP Act, 2008 to wind up the LLP. In case the LLP does not have liabilities or debts to pay it can be closed voluntarily by a unanimous decision of all the partners of the LLP and after that, an application can be filed with the registrar to strike down the name of LLP from its register. However, where the LLP have debts to pay, or there are creditors/liabilities, the LLP must approach National Company Law Tribunal for closure.
Types of LLP Winding up
CLOSE INACTIVE LLP FASTER
- In case your LLP has not started any business or operation or in case it started is not carrying the same as of now since past one year.
- If the LLP Does not have any asset or liability and the bank account of the LLP was either not opened or if opened is closed now.
- The designated partners shall give an affidavit and indemnity bond to settle any liability which may arise on LLP in future.
- An application for closure needs to be filed with the ROC for declaring the LLP as defunct and for striking off its name from the register of LLP.
CLOSE LLP HAVING LIABILITY / DEBT
- The designated partners need to decide to close the LLP first and after that convene a meeting of creditors by giving them proper notice
- The creditors shall decide about closure with at least 2/3 majority and an application for closure to be filed with NCLT
- The official liquidator of the LLP shall be appointed who will dissolve the assets of LLP and deal with liabilities and file his report with NCLT
- NCLT based on the merits of the case shall deliver its decision for closure of LLP and after that the same need to be conveyed to the ROC
CLOSURE OF LLP BY NCLT
- In case the designated partners could not close the LLP due to their difference, an application for closure by NCLT may be filed
- Where the number of partners is reduced below the statutory minimum of two partners for a period of more than six months
- Where the LLP has not filed its annual return (form-11) or the statement (form-8) of accounts for five consecutive years
- If NCLT is satisfied that the LLP is acting against the interest of the sovereignty or integrity of India, security of the state or public order
Step wise Procedure for Closure of LLP in India
- CLOSURE OF BANK ACCOUNT The bank account if opened need to be closed before the procedure of closing the LLP can be started. The designated partners need to approach banker with a request for closure and obtain a closure certificate from the bank that the account maintained with them has been closed.
- PREPARE A STATEMENT OF ACCOUNTS A statement of assets and liabilities need to be prepared and signed by the designated partners, which need to be certified by the auditors of the LLP or in case the LLP did not appoint an auditor any chartered accountant in practice.
- PARTNERS MEETING AND CONSENT Once the bank account of the LLP is closed and a statement of assets or liabilities is drawn and attested by the auditor or any other CA, the partners need to meet and decide on the closure of LLP. the decision for closure must be made as prescribed in the LLP agreement.
- DRAFTING OF AFFIDAVIT & INDEMNITY BOND Once the partners have decided to close the LLP, an affidavit to the truthfulness of the information and documents which shall be filed with the ROC. Further, an indemnity bond to satisfy any future debt which may arise to the LLP after its closure is prepared, signed and attested.
- DIGITAL SIGNATURE OF AT LEAST ONE DESIGNATED PARTNER DSC is the equivalent of physical or paper certificates in digital format. As the application for LLP closure is filed online with Digital Signatures of at least one designated partner. To obtain a class-2 digital signature for the partner a Photo, copy of ID and Address proof duly attested by the gazetted officer is to be submitted along with Form.
- Application Filing For Closure of LLP Finally, an application for closure of LLP is to be filed with necessary attachments duly signed and attested by the designated partner and a practicing chartered accountant, or a company secretary or a cost and management accountant. The roc, if satisfied with the application, shall close the company within 90-120 days.