Winding Up - LLP

What is the winding up of an LLP?

The winding up of an LLP (Limited Liability Partnership) refers to the process of closing down or ending the operations of the LLP. It involves the sale of the assets and the distribution of the proceeds among the partners or creditors, settling of liabilities and debts, and deregistration of the LLP. The winding up of an LLP can be voluntary or through a court order, and the process is governed by the Limited Liability Partnership Act, 2008. The LLP must appoint a liquidator who is responsible for managing the winding up process, and the final accounts must be prepared and filed with the Registrar of Companies.

Types of Winding Up:

There are two types of winding up of an LLP, voluntary and compulsory.

Voluntary Winding Up: When an LLP decides to end its operations, it can choose to do so voluntarily. In a voluntary winding up, the partners of the LLP pass a resolution for winding up, and the LLP must inform the Registrar of Companies within 15 days of passing the resolution. The voluntary winding up can be further classified into two types:

1. Members’ Voluntary Winding Up: When the LLP has sufficient assets to pay off its debts, the partners can choose members’ voluntary winding up. In this case, the partners must pass a resolution for winding up, and the liquidator is appointed by the members. The liquidator is responsible for selling the assets and paying off the creditors. Any surplus amount is distributed among the partners.

2. Creditors’ Voluntary Winding Up: When the LLP does not have enough assets to pay off its debts, the partners can choose creditors’ voluntary winding up. In this case, the partners pass a resolution for winding up, and the creditors appoint the liquidator. The liquidator is responsible for selling the assets and paying off the creditors. If any amount is left, it is distributed among the partners.

Compulsory Winding Up: When an LLP is unable to pay its debts or the number of partners falls below the minimum required number, it can be wound up through a court order. The court can order winding up on the petition of the partners, creditors, or the Registrar of Companies. In a compulsory winding up, the court appoints the liquidator, who is responsible for selling the assets and paying off the creditors.

Steps involved in the Winding Up Process

The winding up process of an LLP involves several steps, which are as follows:

1. Appointment of Liquidator: The LLP must appoint a liquidator who is responsible for managing the winding up process. The liquidator can be appointed by the partners or the creditors, depending on the type of winding up.

2. Notice of Winding Up: The LLP must give notice of the winding up to the Registrar of Companies within 15 days of passing the resolution for winding up.

3. Verification of Claims: The liquidator must verify the claims of the creditors and prepare a list of creditors.

4. Sale of Assets: The liquidator is responsible for selling the assets of the LLP and paying off the creditors. Any surplus amount is distributed among the partners.

5. Settling of Liabilities: The liquidator must settle all the liabilities and debts of the LLP.

6. Preparation of Final Accounts: The LLP must prepare final accounts, which show the financial position of the LLP at the time of winding up.

7. Filing of Final Accounts: The final accounts must be filed with the Registrar of Companies.

Role of the Liquidator

The liquidator plays a crucial role in the winding up process of an LLP. The liquidator is responsible for managing the winding up process, selling the assets, paying off the creditors, and settling the liabilities and debts. The liquidator must act in the best interest of the creditors and the partners and must comply with the provisions of the Limited Liability Partnership Act, 2008.

Process Of Winding UP LLP:

To wind up an LLP, the following procedure needs to be followed:

Step 1: Passing a resolution for winding up

A resolution for winding up the LLP should be passed by the partners and filed with the registrar within 30 days of passing the resolution.

Step 2: Filing of documents with the registrar

Along with the resolution, the LLP should file the following documents with the registrar within 15 days of passing the resolution:

• Statement of assets and liabilities for the period from the last two accounts closure to date of winding up of LLP attested by at least two partners
• Report of the valuation of the assets of the LLP, if any.

Step 3: Declaration by the majority of partners

The majority of partners must make a declaration that the LLP has no debts or will be able to pay the full debts within a period mentioned in the declaration, which should not exceed one year from the date of the commencement of winding up.

Step 4: Publication of resolution

The LLP is required to publish an advertisement regarding the resolution of the winding up in a newspaper that is circulated in the territory where the registered office is located or where the office of the LLP is registered.

Step 5: Appointment of LLP Liquidator

After the approval from the majority of partners is obtained through the resolution, an LLP liquidator is appointed with fixed remuneration. The liquidator will be appointed only after the approval of 2/3rd of the creditors in the value of the LLP.

Step 6: Filing of winding up report by the Liquidator

After the affairs of the LLP are fully wound up, the LLP liquidator will need to prepare a report that states how the winding-up of the LLP has been conducted and the property of the LLP has been disposed of. The LLP liquidator is then required to send this LLP winding up report along with the resolution to the Registrar and file an application with the tribunal.

Step 7: Dissolution

Once the affairs of the LLP are wound up and the LLP liquidator prepares a report in Form 9, the LLP is dissolved. The final accounts are closed with a detailed explanation and the property which has been disposed of.

In case the LLP wants to strike off its name, it can do so by making an application to the Registrar for striking off the name of the LLP using Form LLP 24.

FORM LLP 24:

Form LLP 24 is a document used for the application of striking off the name of a limited liability partnership (LLP) from the registrar of companies. This form was introduced under the Limited Liability Partnership Rules, 2017, and it simplifies the process of winding up an LLP by allowing for a faster and easier way of striking off the name of the LLP from the registrar. The form must be filled out and submitted along with the required documents to the registrar for the LLP to be officially dissolved.