Closing a Limited Liability Partnership (LLP) in India involves the process of winding up and dissolving the LLP. This includes stopping business operations, settling debts and liabilities, distributing remaining assets among partners, and officially dissolving the LLP as a legal entity.
PROCEDURE TO CLOSE A LLP
The procedure for closing a Limited Liability Partnership (LLP) in India typically involves the following steps:
- PARTNER'S DECISION: The partners of the LLP must agree to close the LLP by passing a resolution for winding up the LLP. This decision should be recorded in the minutes of a partners' meeting.
- APPOINTMENT OF LIQUIDATOR: The LLP needs to appoint a liquidator who will oversee the winding up process. The liquidator can be a partner, a professional, or a firm.
- DECLARATION OF SOLVENCY/INSOLVENCY: The LLP must prepare a declaration of solvency if it is solvent, stating that it will be able to settle its debts within a specified period not exceeding one year. If the LLP is insolvent, it must prepare a declaration of insolvency.
- FILING OF FORM 24: The LLP needs to file Form 24 with the Registrar of Companies (RoC) within 30 days of passing the resolution to wind up the LLP. This form contains details about the winding up and the appointment of a liquidator..
- SETTLEMENT OF LIABILITIES: The LLP must settle all its outstanding debts, liabilities, and obligations. This includes making payments to creditors, employees, and other stakeholders.
- ASSET DISTRIBUTION: After settling the liabilities, the remaining assets of the LLP can be distributed among the partners as per the LLP agreement or the mutually agreed terms.
- CLOSING BANK ACCOUNTS: The LLP should close its bank accounts and other financial accounts once all the necessary transactions and payments have been completed.
- FILING OF FINAL DOCUMENTS: The LLP needs to file the necessary documents with the RoC to notify the completion of the winding up process. This includes filing Form 25 and Form 26, along with other required documents.
- DISSOLUTION: Once all the necessary filings have been completed and the RoC is satisfied, it will issue a certificate of dissolution, officially dissolving the LLP.
DOCUMENTS REQUIRED
- Resolution for Winding Up: A resolution passed by the partners of the LLP to wind up the LLP.
- Declaration of Solvency or Insolvency: A declaration stating whether the LLP is solvent or insolvent.
- Consent of Liquidator: Consent from the appointed liquidator to act as the liquidator for the LLP.
- Form 24: This form needs to be filed with the Registrar of Companies (RoC) within 30 days of passing the resolution to wind up the LLP. It contains details about the winding up and the appointment of the liquidator.
- Statement of Accounts: A statement of accounts reflecting the LLP's financial position up to the date of winding up.
- Consent of Creditors: Consent letters from creditors, if any, confirming the settlement of their claims.
- Consent of Partners: Consent letters from partners confirming their agreement to the winding up process.
- Bank Account Closure Letter: A letter from the LLP's bank(s) requesting the closure of the LLP's bank account(s).
- Final Audit Report: A final audit report prepared by a chartered accountant, verifying the LLP's financial position and compliance with applicable laws.
- Form 25: This form needs to be filed with the RoC after the completion of the winding up process. It includes details such as the dissolution date, disposal of assets, and settlement of liabilities.
- Form 26: A declaration by the liquidator stating that all the liabilities of the LLP have been settled or discharged.
FAQs
Yes, an LLP can be closed even if it has outstanding liabilities. However, it is important to settle these liabilities before proceeding with the closure.
If an LLP fails to settle its debts, the partners may be held personally liable to repay the remaining liabilities of the LLP.
Yes, it is mandatory to appoint a liquidator who will oversee the winding up process and ensure compliance with the applicable regulations.
Yes, a partner of the LLP can act as the liquidator, provided there is no restriction in the LLP agreement and the partner is eligible as per the rules.
The time taken to close an LLP can vary depending on various factors, including the complexity of the case and the efficiency of the process. It typically takes several months to complete the closure.