Winding Up of LLP

Winding up of a LLP

 A Limited Liability Partnership (LLP) must be wound up lawfully by paying off its debts, selling its assets, and dividing the proceeds among the partners. The partners may choose to start this process voluntarily, or a tribunal may order it for a variety of reasons, including insolvency, inactivity, or legal violations. Managing the intricacies of winding up necessitates a deep comprehension of legal processes, compliance standards, and money management. 

Within 30 days of the resolution's passing, a resolution for the winding up of the LLP must be passed and lodged with the Registrar to start the winding-up process. The voluntary winding up will be assumed to start on the date the LLP winds up by resolution. Lawgical Adda may assist you in efficiently and swiftly closing your LLP.

The governing law of LLP Winding Up

The following notices and statutes govern the procedures for winding up and dissolving Limited Liability Partnerships (LLPs) in India:

1. Section 65 of the 2008 LLP Act: This clause gives the Central Government the authority to create regulations governing the winding up and dissolution of LLPs.
2. Section 67 of the 2008 LLP Act: This section gives the Central Government the power to apply to LLPs any provision of the Companies Act, 1956, with or without modification. This incorporates winding up rules that, by referencing pertinent laws from the Companies Act, provide for a more flexible and adaptive approach to regulating the dissolution processes of limited liability companies (LLPs).
3. Notification dated January 6, 2010, via GSR 6(E): The Central Government issued this notification to explicitly mandate that certain provisions of the Companies Act, 1956 apply to the winding up of limited liability companies (LLPs), in accordance with the authority conferred under Section 67.
4. The 2012 Rules for Limited Liability Partnership (Winding up and Dissolution): These rules, which were published on July 10, 2012, under notification No. [F.No. 1/7/2012-CL-V], particularly include the steps, documentation, and costs involved in winding up and dissolving limited liability companies (LLPs).

Closing Down LLP By the Tribunal

A Tribunal may begin the winding up of an LLP for the following reasons:

1. The LLP desires to come to an end.
2. For a duration longer than six months, the LLP has fewer than two partners.
3. The LLP is unable to settle its debts.
4. The interests of public order, state security, and Indian sovereignty and integrity have all been violated by the LLP's actions.
5. For any five consecutive fiscal years, the LLP has not submitted an LLP Annual Return or a Statement of Accounts and Solvency to the Registrar.
6. The Tribunal believes that winding up the LLP is fair and justifiable.

Voluntary winding up

This category includes situations where the partners of an online limited liability partnership (LLP) mutually decide to dissolve the LLP. The same can be divided into the subsequent categories.

(a) Members' voluntary winding up

Through its partners, the Limited Liability Partnership may elect to wind up its business on any voluntary basis upon consent from all partners or on any other basis specified in the Limited Liability Partnership Agreement in question. To wind up the LLP and its affairs, the LLP shall designate a liquidation or interim liquidator.

(b) Creditors winding up voluntarily

When the Limited Liability Partnership (LLP) and its creditors believe the LLP might not be able to satisfy and pay its debts in order to carry on with business as usual. In this case, the LLP ought to call a meeting of its creditors so that they can discuss the plan for winding up the business.

Voluntary winding up by creditors

This occurs when the Limited Liability Partnership and its creditors believe the LLP may not be able to continue operating by fulfilling and paying its debts. In this case, the LLP ought to call a meeting of its creditors so that they can discuss the plan for winding up the business.

The process for LLP's voluntary liquidation

A Limited Liability Partnership (LLP) goes through numerous crucial milestones in its voluntary liquidation procedure, which are listed below:

1. The Solvency Declaration (DOS): Get a statement from the majority of selected partners attesting to the LLP's capacity to settle obligations, backed up by an affidavit.
2. Documents to Accompany the DOS: An asset valuation report prepared by a registered valuer and audited financial statements covering the last two years or since incorporation should be included with the DOS.
3. Resolution: Within four weeks of receiving the DOS, pass a resolution for voluntary liquidation and designate an insolvency specialist as the liquidator.
4. LLP's creditors must approve the decision within seven days if the LLP has debts. The approval of the creditors must account for two-thirds of the debt value.
5. Notification: Within seven days following the resolution, notify the Registrar and the Insolvency and Bankruptcy Board of India (IBBI).
6. Procedures for Liquidation: Pending approval from creditors, liquidation is presumed to have started on the resolution date.

Causes For LLP Dissolution

Prevent Noncompliance

As a juristic person and legal entity, an LLP needs continuous compliance upkeep throughout its existence. LLP winding up can be used to terminate an inactive LLP and escape obligations related to compliance.

Steer clear of fines

In addition to fines and penalties, an LLP that fails to register its compliance on time may also have its partners barred from forming another LLP or company.

Low Cost

If compliance is not maintained annually, a non-compliant or dormant LLP may incur additional penalties.

Simple to Shut

A dormant LLP can be wound up with reasonably basic and straightforward requirements. Therefore, closing an inactive LLP as soon as possible is recommended.

Simple Procedure

Through a number of efforts, the Ministry of Corporate Affairs has made the process of winding up or liquidating an LLP simpler. Therefore, much like incorporation, an LLP can be closed down quickly and with little formality.

Lawgical Adda provides professional services to make winding up Limited Liability Partnerships (LLPs) easier, guaranteeing a seamless and legal process from beginning to end. Our team of professionals offers complete assistance, which includes the filing of required paperwork, a statement of solvency, the passing of resolutions, and the designation of a liquidator.