The MCA has revised the LLP Rules by adding form 24, which makes it possible to quickly Strike off the LLP by filing an application to have the name struck down through the Striking off LLP Procedure. The Limited Liability of Partnership Act of 2008 provides instructions on how to close an LLP under Section 63 through the Striking off LLP Procedure. Both voluntary and tribunal-ordered winding up/dissolution are possible in the aforementioned situations. When there hasn’t been any business activity for a year or more, such a business may be forced to close through the Striking off LLP Procedure. In the aforementioned scenario, the defunct LLP may apply to the ROC to have the firm declared insolvent and to have its name removed from the list of LLPs through the Striking off LLP Procedure.
The LLP Act, 2008 specifies the prerequisites for Winding up an LLP in India, Required Documents for Closure of LLP, And the LLP Closure Fees.
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Reason for Closing down an LLP?
The closing down an LLP could occur for a number of reasons, ranging from voluntary winding up to compulsory winding up through the LLP close procedure.
Common reasons for Closing LLP are:
- The members fail to comply with some provisions of the members’ agreement;
- The partners either choose to leave the partnership or are no longer able to do so;
- The business fails to distribute funds in accordance with the contract;
- The business is unable to make timely debt payments.
How to Close LLP in India?
LLP can be closed in two ways, voluntary winding and compulsory winding up.
Compulsory Winding Up:
- The Tribunal should dissolve the limited liability partnership if the limited liability partnership (LLP) requests it happen.
- The limited liability partnership has fewer than two partners for a period of time longer than six months.
- In the event that the limited liability partnership (LLP) is unable to settle its financial obligations.
- If the limited liability partnership (LLP) has behaved against the security of the State or public order as well as against India’s sovereignty and integrity.
- If the limited liability partnership (LLP) has failed to file the annual return or the obligatory Statement of Account and Solvency with the ROC or Registrar for any five consecutive financial years.
If the tribunal determines that dissolving the limited liability partnership is just and equitable
Submit form 24 and the partners’ declaration to the ROC.
Indemnity bonds and an affidavit attesting that the information is accurate to the best of the partners’ knowledge should be submitted along with the main application. Approximately 20 working days the application’s details will be published on the Registrar’s website for a month-long notice. Approximately 10 working days following the first month, the registrar will officially close/dissolve your LLP by removing its name from the register and publishing a notice in the official gazette.
KEY FEATURES of Voluntary Winding-up –
Easy and Hustle Free – If the LLP has been inactive for more than a year and every required filing has been made, it can be readily closed.
Negligible Compliances – Even if your firm is not in operation, you must comply with some regulations that apply to LLPs. You will be exempt from these compliances if you close the LLP.
Requirements for Closure of LLP
- The LLP hasn’t operated since its incorporation or for a minimum of a year.
- Up until the conclusion of the financial year in which the limited liability partnership discontinued operating its business, filed past-due returns in Forms 8 and 11.
- Has not opened any bank accounts, and where they have, they have all been closed along with a certificate.
- LLP has no obligations to pay any creditors.
What are the required documents for closure of LLP?
Here is a list of required documents for closure of LLP which need to submit in order to close it.
- Application for LLP Closure;
- Consent of All Partners;
- Statement of Company Accounts Showing Zero Liabilities and Assets Certified by a Practicing Chartered Accountant with a Date, Not More Than 30 Days Prior to the Date of Application Filing;
- An Affidavit Executed Either Individually or Jointly by All Partners;
- A Copy of the Most Recent Income Tax Return Acknowledgement;
- Initial LLP Agreement along with All Supplementary Agreements (If Applicable)
Procedure for Strike Off of LLP
- In striking off LLP procedure, the default penalty for failing to file any required statutory return is Rs. 100 per day, with no upper limit. In order to preserve compliance and prevent unwarranted penalties, it is therefore recommended to wind up inactive LLPs through the procedure for strike off of LLP because there is no need to file LLP Form 11 or LLP Form 8 or an income tax return for the LLP each financial year
- Before the Limited Liability Partnership (Amendment) Rules were introduced in 2017, the process to dissolve an LLP was drawn out and difficult. But since the LLP Form 24 was introduced, the procedure for strike off of LLP has been made simple and straightforward
- It is therefore advised that business owners who have inactive or delinquent limited liability partnerships (LLPs) that are incurring fines take advantage of the Striking off LLP Procedure to liquidate the LLP.
Filing LLP Form 24
In order to close an LLP in India, the following Striking off LLP Procedure must be followed:
Step 1: LLP has been ceased to work
- Only LLPs that have neither started a business nor stopped engaging in any form of commercial activity are required to complete LLP Form 24, as part of the procedure for LLP closure. Therefore, the LLP must initially stop all commercial activity if it is either operating or the promoters want to shut it off through the procedure for LLP closure.
Step 2: Closure of Bank Account
- Only LLPs that have neither started a business nor stopped engaging in any form of commercial activity are required to complete LLP Form 24 as part of the process of closure of LLP. Therefore, the LLP must initially stop all commercial activity if it is either operating or the promoters want to shut it off through the process of closure of LLP.
Step 3: Preparation of Declaration & Affidavits
- Each Designated Partner of the LLP should initially sign the facts of the declaration, either jointly or separately, to indicate that the Limited Liability Partnership has not yet started doing business or that it has discontinued carrying forward commercial activity from the Date as part of the procedure to strike off LLP.
- In addition, the LLP Partners should declare the LLP as having no liability because any liability that might develop even after the name of the LLP has been removed from the Register should be declared through the procedure for striking off LLP. Even when an LLP is closed, the Partners Liability must continue to be processed using Form LLP 24 as part of the procedure for striking off LLP
Step 4: Closure of LLP Documents Preparation
- The LLP’s deed and income tax return statement must be submitted with Form LLP 24 as part of the LLP closure procedure. The income tax return statement process is not necessary if the LLP has not conducted any commercial activity or filed any income tax returns. Alternatively, a copy of the latest income tax return that was submitted with an acknowledgment can be included with the application to close the LLP through the LLP closure procedure.
Step 5: Submit All Pending LLP Closure Documents
- After the LLP’s incorporation, the agreement must be submitted to the appropriate MCA within 30 days after registration as part of the LLP closure process. The first LLP agreement must be filed properly, regardless of whether it is entered into and not filed, together with all changes, in the event that this compliance was forgotten to file along with the LLP agreement during the LLP closure process.
- In addition, any unfiled Form 8 and Form 11 returns that are past due as of the end of the most recent financial year, during which the limited liability partnership (LLP), ceased to engage in active business operations, must be filed on or before the LLP Form 24 as part of the procedure for closing of LLP.
- The Limited Liability Partnership (LLP) must carry on its revenue-generating business as of the date of the cessation of commercial operations, and any transactions that occur after that date—such as cash receipts from students who owe money or payments to creditors—do not count as part of that business.
Step 6: Certification from Chartered Accountant
- After the necessary documents for closure of LLP, specifically LLP Form 24 preparation, is complete, an account statement with no assets and no liabilities that have been approved by a chartered accountant as of the filing date of Form 24 but not earlier than 30 days must be received as part of the Documents required for closure of LLP.
Step 7: File LLP Form 24
- The MCA should then be filed with all the previously stated closure of LLP documents and the LLP Form 24 in order to remove the name of the LLP. The relevant Company’s Registrar will send a thorough notice to be published on the MCA website declaring the name removal of the LLP while processing the application; finding any acceptable.
- The partner will be held accountable for any liabilities that may later arise simply by submitting the form, which will entitle them to the payment of liabilities made.