Limited Liability Partnerships (LLPs) are similar to general partnerships but have limited liability for their partners. An LLP is basically a partnership with certain legal rules and regulations that are more complex than those for a traditional partnership. As a result, closing an LLP is also simpler than closing a partnership.
There are some benefits to being a member of an LLP, but there are also some drawbacks. The number of instances where people do not know how to register an LLP is high, and the number of LLP partners that do not know there is a specified procedure for closing an LLP is even higher.
In order to clarify this confusion, Vakilsearch has created this step-by-step guide.
According to the LLP Act, 2008, there are some important guidelines for closing an LLP. In order to close an LLP, you can use the following methods:
1. LLP declared insolvent
An application should be submitted to the Registrar declaring the LLP defunct or no longer functional. To file under Section 37(1)(b), eForm 24 must be submitted, along with all of the required papers listed on the form. Once the application is submitted, the name of the Limited Liability Partnership is struck from the LLP register.
2. Winding up an LLP on a voluntary basis
A voluntary closure of LLP in India takes a little longer than declaring it defunct.
Involuntary winding up
The voluntary winding up of a partnership occurs when the partners decide to discontinue and close the partnership. A LLP can be wound up voluntarily with consent from at least 3/4th of its partners. It is necessary to file Form 1 with the Registrar within 30 days after the resolution is passed. Additionally, the individual responsible for winding up the company should receive a copy of the sanction.
Liquidation of creditors
The majority of partners must then announce the decision in Form 2. As part of the resolution, they should state that they have no unpaid sum or they will pay their debts within an assured time period (determined by the partners) but not exceeding one year from the date of passing the resolution.
Winding up publication
Within 14 days of the passing, the Limited Liability Partnership should advertise in a newspaper. Either the one circulating in the territory where the LLP is registered or that of its principal office can be used.
Liquidator appointed for Limited Liability Partnerships
In an LLP liquidation, a liquidator with fixed remuneration is appointed by the majority of partners. LLP liquidators can only be appointed after two thirds of the creditors approve their appointment.
A LLP liquidator can be nominated by the creditors if they wish. LLP liquidators appointed simultaneously by creditors and partners are eligible to serve as liquidators. In the absence of a liquidator, the Tribunal will appoint one.
The dissolution of
As soon as the affairs of the LLP are wound up, which means that liabilities have been discharged and assets have been liquidated, a Form 9 report will be made by the LLP liquidator. In this document, the procedure for winding up will be described. The final closing of the accounts will include all the detailed explanations and a list of the property that has been disposed of. Following this, the dissolution request is approved by the partners and creditors.
Conclusion
There are two ways to close an LLP. In one scenario, partners decide to close the firm themselves, in the other, circumstances force them to do so.
Nevertheless, closing an LLP involves a number of steps and complexities. As a result, we recommend retaining the services of professionals with expertise in this area. Vakilsearch can assist you with this entire process quickly and easily. Contact our experts today!