Closing of LLP in India: A Full Overview
Limited Liability Partnerships (LLPs) provide businesses with the flexibility of a partnership while maintaining the limited liability of a LLP. However, there are times when partners may decide to close the LLP. If you’re wondering how to close the LLP or want to understand the LLP closure procedure, this guide will walk you through the entire process, including legal provisions, required documents, and conditions to meet.
Legal requirements for closing of LLP in India:
The Limited Liability Partnership Act of 2008 and Rule 24 of the LLP Rules of 2009 govern the winding up of the LLP. The LLP can be closed voluntarily by its partners or by order of the National Company Law Tribunal (NCLT).
The closure process typically involves filing Form 24 LLP, which simplifies the procedure for defunct LLPs to strike off their names from the Registrar of Companies (ROC).
The NCLT can direct to dissolve of LLP if:
- The LLP is financially insolvent and unable to settle its debts.
- The LLP has acted against the interests of the sovereignty or integrity of India.
- The LLP is involved in fraudulent activities.
Conditions to be Satisfied Before Closing of LLP:
Before initiating the closure of LLP, certain conditions must be fulfilled:
- No Business Operations: The LLP should not have done business for at least a year or more since its formation.
- Settlement of Liabilities: The LLP must settle all outstanding liabilities and debts.
- Partners’ Consent: To file the strike-off application, all designated partners must provide consent.
- Bank Account Closure: The LLP’s bank accounts must be closed, and the bank should provide a “No Objection Certificate” (NOC).
Documents Required to Close the LLP:
To proceed with the dissolution of limited liability partnership, the following documents are required:
- Copy of the LLP’s incorporation certificate.
- Consent of all partners for the closure.
- Bank closure statement showing no transactions.
- Affidavit from all designated partners claiming which the LLP has no liabilities.
- Indemnity bond signed by all partners, ensuring indemnity for any liabilities post-closure.
- Statement of account certified by a Chartered Accountant, showing no liabilities.
- Form 24 (LLP) and a duplicate of the board resolution.
Procedure for Closing or Striking Off LLP:
Here’s a detailed look at the LLP closure procedure:
- Prepare the Required Documents: Collect all necessary documents, including the affidavit, indemnity bond, bank closure statement, and consent letters from partners. Ensure the financial accounts are audited and finalized up to the closure date.
- File LLP Form 24: The process of closing the LLP begins with submitting LLP Form 24 to the Registrar of Companies. This form is for removing the name of a defunct LLP from the database. Make sure all fields in Form 24 LLP are correctly filled, and the required documents are attached.
- Submit an Application to the ROC: Once the form is prepared, submit it to the ROC along with the necessary fees. The LLP closure fees may vary based on the LLP’s state of registration.
- Verification by ROC: The ROC verifies the submitted documents and checks for any discrepancies. If all conditions are satisfied and documents are in order, the ROC processes the application.
- Publication of Notice: The ROC publishes a notice in the official gazette, informing the public about the proposed closure of LLP. This provides an opportunity for objections, if any, to be raised.
- Strike-Off of the LLP Name: If no objections are received within the specified time, the ROC strikes off the LLP’s name from the register, completing the dissolution of the LLP.
Voluntary vs. Compulsory Dissolution:
- Voluntary Dissolution: Partners may voluntarily close the LLP by mutual consent and filing the required documents under the LLP long-form closure process.
- Compulsory Dissolution: The LLP can be dissolved by the order of the NCLT if it is involved in illegal activities or is unable to meet its liabilities.
Key Points to Remember:
- LLP strike-off is applicable only to LLPs that have ceased operations.
- The LLP closure fees depend on state-specific ROC requirements.
- Filing the correct version of Form 24 LLP and complying with Rule 24 of LLP Rules 2009 ensures a smooth process.
- The dissolution of a limited liability partnership does not exempt partners from future liabilities arising from past activities.
Conclusion:
Closing the LLP requires a thorough understanding of the legal framework and dedication to the prescribed procedure. The winding up of the LLP calls for satisfying certain conditions, gathering documentation, and filing the necessary forms with the ROC. By following the outlined steps and utilizing Form 24 LLP, you can simplify the closure of LLP and avoid legal complications.
If you’re still unsure about how to close LLP, consult professional advisors to assist with the LLP closure procedure. Accurate compliance is necessary to ensure a simple and hassle-free collapse of the LLP.