Winding Up Of LLP
LLP Winding Up
Winding up of an LLP is an easy process. This process can be initiated voluntarily or by tribunal or by striking off the LLP name by registrar. In winding up of an LLP, business assets are sold as well as creditors are paid and in event of any surplus profit or assets, they are distributed among LLP partners as per LLP agreement.
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Modes Of Winding Up A LLP In India
1 Voluntary winding up
2 Striking off
3 Winding up by tribunal
Voluntary Winding Up
In order to pass resolution of voluntarily winding up the LLP, approval of 3/4th of the partners are needed
from the total partners. The approval of lenders is also required in case LLP has lenders (either secured or
unsecured) in the process of winding up of LLP. In order to start a liquidation process of an LLP, majority of
the designated partners has to make a declaration ensuring that LLP has no debt and they are competent
enough to pay the full debt within a period of not more than 1 year from the start of winding up of LLP. LLP
has to ensure that that they are not winding up due to defraud any person or persons.
LLP must prepare declaration for winding up with statement of assets & liabilities until the most recent
predictable date right before the making of declaration for winding up LLP. In case there are assets in LLP,
valuation of assets are prepared by the valuator must also be submitted.
Voluntary wind up is further classified into two categories –
Winding up of LLP voluntarily by members – An LLP may decide to wind up its affairs voluntarily if
partners ensure that they are capable of paying full debts within 12 months after the starting of winding
up procedure. LLP must appoint a liquidator who not only controls but even wind up business affairs as
early as possible. The liquidator is also responsible to file the necessary notifications needed under the
Winding up of LLP by creditors – In this case of voluntarily winding up of LLP, LLP needs to conduct
meeting of creditors and ask them to consider the proposal of winding up of LLP. If creditors agrees, LLP
has to appoint a liquidator to wind up its business affairs & file the necessary notification needed under
the LLP act.
As per limited liability partnership (amendment) rules 2017 w.e.f 20th may 2017, the LLP rules are amended
by the ministry of corporate affairs. MCA introduced LLP form 24 and by this method, the name of LLP can
be easily strike off by making an application to the registrar.
Winding Up By Tribunal
LLP can be wind up after the order from the tribunal court. It is also known as compulsory wind up. The
court may appoint an official liquidator to wind up the affairs of their business. In case no liquidator is
appointed by the court, official receiver will be the LLP liquidator. The liquidator will file the necessary
notifications under the LLP act.
Reasons To Wind Up LLP
LLP voluntarily wants to wind up
LLP is not competent enough to pay its debts.
LLP has less than 2 partners for a period of more than 6 months
LLP has acted against the interest of sovereignty & integrity of India, state security, public order, friendly
relations with foreign states, decency or morality etc.
LLP has not filed annual returns or statement of accounts and solvency with the registrar for any 5 consecutive financial years.
The tribunal opinion is just that the LLP should be wound up
Procedure To Wind Up LLP
Resolution & affidavits – In the first step, LLP has to take the consent of other partners before starting
the wind up process. Meeting with the partners are conducted and proposal of voluntarily winding up of
LLP is kept in front of other partners for consideration along with affidavits.
Appointment of LLP liquidator – In the second step, LLP liquidator must be appointed within 30 days of
passing of resolution in the process of voluntarily winding up the LLP. In case LLP has creditors, they
have to take approval from 2/3rd of the creditors in the meeting unless the appointment of LLP
liquidator will not be considered valid.
LLP liquidator performs many functions and duties in winding up LLP. LLP liquidator controls the
business affairs, settle the creditors and adjust the rights of the partners. He is required to maintain
proper books of accounts in relation to winding up of LLP.
Submission of wind up report by LLP liquidator – After fully wounding up the affairs of LLP, LLP
liquidator prepares a report stating the manner in which procedure of winding up has been conducted
and property has been disposed off. Prepared report is checked and if 2/3rd of the partners and
creditors found it satisfactory, resolution for winding up of accounts and explanation for dissolution
must be passed by the partners.
After passing of resolution, LLP liquidators sends the windup report along with the passed resolution to
the registrar and file the application with the tribunal.
Dissolution of LLP – In the fourth step, if tribunal is satisfied with the procedure followed by the LLP in
winding up its operations. Tribunal will pass the order that LLP has been dissolved. LLP liquidator also
required to file the order copy from the tribunal to the registrar for winding up the LLP. After receiving
the order copy passed by the tribunal, the registrar publishes a notice in the office gazette and declared
the same as dissolved.