The MCA (Ministry of Corporate Affairs) has amended LLP Rules by introducing form 24 which paves way to easily dissolve the LLP by making an application to strike down the name. Section 63 of Limited Liability of Partnership Act, 2008 outlines on winding procedures of LLP. The mentioned winding up/ dissolution could either be voluntary or by Tribunal. The closure of such business can be initiated when there exists no business for the period of one year or more. In above mentioned scenario the dormant LLP can make an application to the ROC for declaring the company as defunct and request for removing the name of the LLP from the register of LLP’s
Winding Up a LLP
The penalty for LLPs defaulting in filing of any statutory return are huge, and also involves various penalties. Hence, its often best to windup dormant LLPs so that there is no requirement to file LLP Form 11, LLP Form 8 and Income Tax Return for the LLP each financial year after LLP Registration to maintain compliance and avoid penalty.
Before the introduction of the Limited Liability Partnership (Amendment) Rules, 2017, the procedure for winding up a LLP used to be long and cumbersome. However, with the introduction of LLP Form 24, the procedure has been made easy and simple.
The Central Govt has been empowered to make rules for the provisions in relation to winding up and dissolution of LLP under section 65 of LLP Act.
Filing LLP Form 24
Step 1: Cease Commercial Activity
LLP Form 24 can be filed only by LLPs that never commenced business or have ceased commercial activity. Hence, if the LLP is operational and the promoters wish to close the LLP, the LLP must first cease all commercial activity.
Step 2: Close Bank Account(s)
LLP Form 24 can be filed only by those LLP that have no creditors and no open bank account. Hence, prior to filing LLP Form 24, any bank account opened in the name of the LLP must be closed and a letter evidencing closure of the bank account in the name of the LLP must be obtained from the Bank.
Step 3: Prepare Affidavits & Declaration
All the Designated Partners of the LLP must first execute an affidavit, either jointly or severally, that the Limited Liability Partnership ceased to carry on commercial activity from (Date) or has not commenced business.
Further, the LLP Partners must also declare that the LLP has no liabilities and indemnify any liability that may arise even after striking off its name from the Register. The liability of the Partners would not be extinguished even after closure of a LLP while using Form LLP 24.
Step 4: Prepare Documents
Along with Form LLP 24 the income tax return of the LLP and LLP deed must be enclosed. In case the LLP has not filed any income tax return and it has not carried on any business activity, then it is not required. Else, a copy of the acknowledgement of the latest Income-tax return filed must be attached with the application for closing the LLP.
Step 5: File Any Pending Documents
After incorporation of a LLP, the LLP agreement must be filed with the MCA within 30 days of registration. In case this compliance was missed and LLP agreement was not filed, then the initial LLP agreement, if entered into and not filed, along with any amendments must be filed.
Also, any overdue returns in Form 8 and Form 11 up to the end of the financial year in which the limited liability partnership ceased to carry on its business or commercial operations must be filed before filing LLP Form 24. The date of cessation of commercial operation is the date from which the Limited Liability Partnership ceased to carry on its revenue generating business and the transactions such as receipt of money from debtors or payment of money to creditors, subsequent to such cessation will not form part of revenue generating business.
Step 6: Obtain Chartered Accountant Certificate
Once all the documents for filing of LLP Form 24 is prepared, a statement of accounts disclosing NIL assets and NIL liabilities, that is certified by a practising Chartered Accountant up to a date not earlier than thirty days of the date of filing of Form 24 must be obtained.
Step 7: File LLP Form 24
The above mentioned documents along with LLP Form 24 (Download LLP Form 24) can be then filed with the MCA to strike off name of LLP. On processing the application, if found acceptable, the concerned Registrar of Companies would cause a notice to be published on the MCA website announcing the striking off of the LLP.
FAQs
What are the grounds for winding up an LLP?
Grounds for winding up an LLP in India include the fulfillment of the LLP’s objectives, expiry of the LLP’s term, mutual agreement among partners, or a tribunal order.
Do I need to appoint a liquidator for winding up an LLP?
Yes, a liquidator needs to be appointed to oversee the winding-up process. The partners can appoint an individual or a firm as the liquidator.
Can an LLP be revived after it has been closed?
It is generally not possible to revive a closed LLP. However, in certain cases, the National Company Law Tribunal (NCLT) may order the revival of an LLP.