In case the LLP wants to close down its business or where it is not carrying on any business operations for the period of one year or more, it can make an application to the Registrar for declaring the LLP as defunct and removing the name of the LLP from its register of LLP’s. In this article we have discussed everything about LLP Strike off / winding up off LLP procedure in India

What is an LLP?

LLP means an alternative corporate business form that it gives the benefits of limited liability of a company and the flexibility of a partnership. The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name. 

The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP. 

Further, no partner is liable on account of the independent or unauthorized actions of other partners, thus individual partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct.

Mutual rights and duties of the partners within a LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be. The LLP, however, is not relieved of the liability for its other obligations as a separate entity. Since LLP contains elements of both ‘a corporate structure’ as well as ‘a partnership firm structure’ LLP is called a hybrid between a company and a partnership.

Striking off of LLP made easy

By introducing the Limited Liability Partnership (Amendment) Rules, 2017 with effect from 20th May, 2017, The Ministry of Corporate Affairs has recently amended Limited Liability Partnership Rules, 2009. With this amendment, LLP Form 24 has been introduced by the MCA and it is now possible to easily close an LLP by making an application to the Registrar for striking off the name of LLP.

Ways of Striking off LLP

An LLP can strike off its business by adopting any of the following two ways:

A) Declaring the LLP as Non-functioning:

In case the LLP wants to close down its business or where it is not carrying on any business operations for a period of one year or more, it can make an application to the Registrar for declaring the LLP as defunct and removing the name of the LLP from its register of LLP’s.

B) Winding up of LLP:

It is a process where all the assets of the business are disposed off to meet the liabilities of the same and surplus any, is distributed among the owners. The LLP Act 2008 provides for following two modes for winding up the LLP i.e.:

• Voluntary winding up
• Compulsory winding up

Voluntary Winding up: Under this, the partners may between themselves decide to stop and wound up the operations of the LLP.

Compulsory winding up: A limited liability partnership may be compulsorily wound up by the Tribunal,—

• If the limited liability partnership decides that limited liability partnership be wound up by the Tribunal;
• If for a period of more than six months, the number of partners of the limited liability partnership is reduced below two;
• If the limited liability partnership is unable to pay its debts;
• If the limited liability partnership has acted against the interests of the sovereignty and integrity of India, the security of the State or public order;
• If the limited liability partnership has made a default in filing with the Registrar the Statement of Account and Solvency or annual return for any five consecutive financial years; or
• If the Tribunal is of the opinion that it is just and equitable that the limited liability partnership be wound up.

Process of Strike off of LLP

In case the LLP wants to close down its business or where it is not carrying on any business operations for a period of one year or more, it can make an application to the Registrar of Companies for declaring the company as defunct and removing the name of the LLP from its register of LLP’s. The name of LLP can be struck off by the registrar or by the LLP in e-Form 24 with the consent of all partners. 

On receiving the application, the registrar would send a notice to the Limited Liability Partnership and all its partners, of his intention to remove the name of the LLP from the register and requesting them to send their representations along with copies of the relevant documents, if any, within a period of 30 days from the date of the notice.

On completion of the time mentioned in the notice, if there are no adverse representations from LLP partners or general public, the registrar could if satisfied, strike off the LLP name from the register and publish a notice in the official gazette.

Documents required for Closing an LLP:

To strike off the name of the LLP, an application is required to be made in e-Form 24 with following below mentioned documents:

• A statement of account disclosing nil assets and nil liabilities, certified by a Chartered Accountant in practice made up to a date not earlier than thirty days of the date of filing of Form 24.
• Copy of acknowledgement of latest Income tax return- Self Explanatory
• Copy of the initial limited liability partnership agreement, if entered into and not filed, along with changes thereof
• An affidavit signed by the designated partners, either jointly or severally, to the effect:

1. That the Limited Liability Partnership has not commenced business or where it commenced business, it ceased to carry on such business from ………….(dd/mm/yyyy);
2. That the limited liability partnership has no liabilities and indemnifying any liability that may arise even after striking off its name from the Register;
3. That the Limited Liability Partnership has not opened any Bank Account and where it had opened, the said bank account has since been closed together with certificate(s) or statement from the respective bank demonstrating closure of Bank Account;
4. That the Limited Liability Partnership has not filed any Income-tax return where it has not carried on any business since its incorporation, if applicable.

• Copy of Detailed Application- Mention full details of LLP plus reasons for closure
• Copy of Authority to Make the Application- Duly signed by all the Partners.

Before the introduction of the Limited Liability Partnership (Amendment) Rules, 2017, the procedure for winding up an LLP used to be long and cumbersome. However, with the introduction of LLP Form 24, the procedure has been made easy and simple.

Hence, its best for Entrepreneurs having dormant or defaulting LLPs that are accruing penalty to use this opportunity to close the LLP.