Overview on Closure of LLP
- The LLP which is not leading on any business plan since incorporation or terminates to carry on the profession for one year or more can apply including ROC to strike off the name of the LLP. There could be various reasons for the closing of LLP, which can vary from 'voluntary winding up' to 'compulsory winding up'.
- The Ministry of Corporate Affairs launched LLP Form 24 via an alteration in the Limited Liability Partnership Rules, 2009. Nevertheless, the appeal for the closure of LLP is directed to specific criteria. Limited Liability Partnership (LLP) is a general business form in which per co-worker has restricted responsibilities. An LLP is firm supporting which specific legal sessions and documents take place. There is a pre-defined manner as to how one can designate or closure his/ her LLP. There are some benefits to be in an LLP, but at the same time, there are few demerits as well.
- In multiple occasions where people don't even know how to register an LLP company, but, most of them do not have any idea that there is a strict method as to how an LLP to get closed. In this blog, you will be removing such misconceptions, and we have explained the detailed process and the documentation required to Close an LLP registered firm in India.
Closing a Limited Liability Partnership
Qualification: Criteria to the Legal Fold
- The LLP is not moving on business since establishment or for one year or longer.
- Indexed delayed returns in Form 8 and Formed 11 up to the end of the fiscal year in which the limited liability partnership terminated to carry on its affairs.
- Has not determined any bank account since closed along with a certificate.
- LLP has no obligation or payment due to any lenders.
- IT returns for the immediate fiscal year is filed.
Essential Documentations to Close an LLP
- The LLP must not have performed its profession or commercial services for one year or longer.
- A record of account dispensing zero assets and liabilities made to till period not advanced than thirty days of the date of filing approved by a Chartered Accountant be provided.
- The LLP need not own any responsibilities and assets.
- The LLP need not hold an existing Bank Account. In case the Bank account was freed, the statement must be closed, and comment or certificate from the bank should announce the closure of Bank Account to be implemented.
- All the Partners should own consent for implementing.
- All Appointed partners must have to perform a statement of fact, and Indemnity Bond allowed to repay any liability that may appear after the name has been marked out of the Registrar.
- Proof of the last Income-tax return recorded by the LLP, if the LLP is managing any business and has entered some returns
- The acceptance letter that the LLP has no liability or payment due to all the lenders.
- IT returns for the current Financial Year is filed externally any due.
- The PAN card photographs of all the nominated partners
- Aadhar proof of all the partners
- The copy of LLP agreement;
- The permanent address of all the members and partners
The Detailed Procedure: Winding up of the Company
- The failure penalty for LLP's defaulting in any sanctioned filing return is Rs.100 per day; not limited to any highest limit. Therefore, it is the most desirable option to windup dormant LLP's as before-mentioned, there is nil obligation to file 'LLP Form 11' or 'LLP Form 8', and Income Tax Return filing for the LLP every financial year, to maintain agreement and to avoid needless penalty.
- Beforehand to the enlightenment of the Limited Liability Partnership (Amendment) Rules in 2017, the scheme to wind up an LLP used to be lengthy and complicated. But, with the initiation of LLP Form 24, the method has been made easy and more straightforward. So, it is desirable for the Entrepreneurs becoming dormant or defaulting LLPs that are getting a penalty to make use of this chance to close the LLP.
- Filing LLP Form 24
The following system shall be followed in India for sealing an LLP by filing Form 24:
- Commercial Activity – Cease
LLP Form 24 has to be presented only by the LLPs which never initiated any business or have terminated any commercial enterprise. Therefore, if the LLP is unless operational or the promoters need to shut off the LLP, the LLP must originally cease all business ventures.
- Close Bank Account
LLP Form 24 should be listed only by those LLP that has nil creditors and zero open bank account. Consequently, before to presenting LLP Form 24, any such bank accounts started in the LLP's name must be closed and an evidencing cessation letter of the bank account in the title of the LLP should be obtained from the Bank.
- Testimonies & Declaration Preparation
All Designated Partner of the LLP should originally execute the facts of communication, either together or independently, so that the Limited Liability Partnership stopped to carry forward commercial project from the Date or has not commenced business. In supplement to this, the LLP Partners should maintain the LLP as it has no liability, any responsibility if arise even after striking off the LLP's name from the Register. The Partners Liability shall not be checked even after the closing of an LLP; while preparing for Form LLP 24.
- Prepare Certificates
Including Form LLP 24, the income tax return charge of the LLP and the LLP's deed must be offered. In case, the LLP has not filed the income tax returns, and it has not processed any business activity, then the income tax return statement process shall not be required. Or else, an acknowledgement copy of the last filed Income-tax return can be attached with the appeal for sealing the LLP.
- List All Pending Records
Following the LLP incorporation, the settlement should be filed with the respective MCA within thirty days of enrollment. In any inescapable circumstances, this docility got missed to filed along with the LLP agreement. After that, the first LLP agreement; whether it is inserted into and not filed, simultaneously with all amendments must be registered duly.
Combined to this, any delayed return in Form 8 and Form 11 up to the end of the contemporary financial year in which the limited liability partnership (LLP) ceased to take a move on its business operations or business must be filed on or ere filing the LLP Form 24.
The stoppage date of commercial operations is the Date from which the ceased Limited Liability Partnership (LLP) has to carry forward its money-generating business. And the transactions such as cash receipts from the pupil who have their debt or money payment to creditors, after those cessations will not be the part of the revenue-generating business.
- Get a Chartered Accountant Certificate
Once the necessary documents for filing the LLP Form 24 is prepared, an account statement revealing zero assets and zero liabilities, that is approved by a Chartered Accountant till Date not earlier than 30 days of the Form 24 filing period must be obtained.
- File LLP Form 24
All the mentioned documents along with the LLP Form 24 (Download- LLP Form 24) should be then filed along the MCA to remove the name of LLP. While processing the application; found any acceptable, the concerned Company's Registrar will send a detailed notice to be published on the MCA website announcing the name removal of the LLP.
Closure: By Announcing the LLP Defunct
An appeal should be made declaring that the LLP is no more in a working position or is defunct and refer to the Registrar. eForm 24 is requisite for filing under Section 37(1)(b), and all the required documents stated in the form is also an essential prerequisite for which one is offering it. After the servility, the name of the LLP is struck off from the LLP’s register.
- Winding up the LLP
Winding up of an LLP is operated by the LLP Act 2008, attracting the provisions such as Sections 63, 64 and 65.
There are two grades in the winding-up process. They are-
1) Winding Up
- Voluntary winding up
Voluntary winding up happens when the partners choose amongst themselves to suspend and close the LLP. LLPs can be optionally wound-up by passing a presentation with the consent of at least 3/4th of the total number of partners. A model of the decision should be recorded with the Registrar on Form 1 within the 30 days of transferring the resolution. Subsequently, with this, a model of the command should be given to the somebody who takes care of the process of winding up.
- Winding up with creditors
An advertisement should be made by the majority of the partners in Form 2 dispensing that they have no sum unpaid or they will pay their debts within an assured period (period fixed by the partners). But it should not exceed more than one year from the date of passing of the recommendation for the sake of winding up.
- Announcement of winding up the resolution
After the passing of the decision for winding up and receiving the consent from the creditors for winding up, then within 14 days, the LLP should give a notice of the decision by advertisement in a newspaper. It should circulate in the territory where the office is registered, or the principal office of the LLP is located.
- Appointment of LLP liquidator
With the support of the majority of the partners, through resolution, voluntary liquidator as the LLP liquidator is equipped with fixed remuneration. The liquidator will be selected only after the approval of 2/3rds of the lenders in value of the LLP.
If the creditors need, then they have a choice to choose an LLP liquidator. In a case of immediate assignments by the creditors and the partners, the LLP liquidator selected by the creditors will come into continuation. If no liquidator is acting, then the Tribunal will be choosing an LLP liquidator.
As the moment of closure circumstances of the LLP are wound-up, when liabilities have been discharged, and assets have been liquidated, a description will be made by LLP liquidator, in Form 9. It should declare how the winding-up has been conducted, including the final closing of the accounts with all the detailed explanations, and the property which has been disposed of. After this, the support of the partners and creditors is sought for dissolution. At the end it can be concluded by saying that closing an LLP is preferably a two-way process, one is when one wants to close it and decide to do it and on the other hand when the circumstances make one do it.
Latest: LLP settlement Scheme, 2020, A hope for Delayed once of MCA LLP Forms
- Security of Doing Market
Accommodating comfort in doing business has perpetually been on the list of the Government of India. And for this determination, the government has ever tried to introduce new projects from time to time to encourage the business proprietors to stick to business. To make this step forward, The ministry of corporate affairs (MCA) has begun a one-time amnesty scheme for Limited Liability Partnership (LLP) businesses that have failed to file the necessary statutory documents such as annual statements, transfer in directors, etc.
The movement will not only promote the efficiency of doing business but also will cleanse the system. It presents these companies with a one-time amusement in payment of additional fees and protection from prosecution. Consequently, the Central Government has decided to precede a scheme namely “LLP Settlement Scheme 2020”, by allowing a One-time condonation of delay statutory filling.
LLP Settlement Scheme, 2020: Regards to Documentation
- Form 3
Information concerning the limited liability partnership agreement and changes, if any, made therein.
- Form 4
Notice of assignment, cessation, change in name/ address/ designation of a designated partner or partner and consent to become a partner/ designated partner.
- LLP Form 8
Statement of Account & Solvency (Annual or Interim).
- LLP Form 11
Annual Return of Limited Liability Partnership (LLP).
Essential Features of LLP settlement Scheme, 2020
- Time Limit
The Scheme will be in force from 16-03-2020 to 13-06-2020.
- One time Scheme
It would permit a “one-time condonation of delay in Late filing statutorily required documents of LLP” with the Registrar of Companies.
- Additional Fees
The LLP concerned has to pay a nominal additional fee of Rs 10 per day for the period of delay as well as any actual cost that is to be paid for submitting the document. The additional charge per document would be capped at Rs 5,000.
The Scheme is applicable for defaulting LLP who has not filed return which was due for filing till 31st Oct 2019
- Last date for filings
The defaulting LLPs, which have submitted their pending documents till 13th June 2020 and made right the default, shall not be subjected to prosecution by Registrar for such defaults.
- Non- applicability to Striking Off LLPs
This Scheme shall not apply to LLPs which have made an application in Form 24 to the Registrar, for striking off its name from the register as per provisions of Rule 37(1) of the LLP Rules, 2009.
- Conclusion of the Scheme
On the termination of the Scheme, the Registrar shall take necessary action under the LLP Act, 2008 against the LLPs which have not availed this Scheme and are in default in filing of documents as required under the provisions of LLP Act, 2008 promptly.
Frequently Asked Questions
A 'Limited Liability Partnership', i.e. LLP, is a partnership under which some or all the associates have limited liability.
When the LLP is inoperative from the date of incorporation or inactive for at least one year, and when LLP does not have any assets/liabilities as on the date of application.
In matters where the LLP wants to close down its business or where it is not carrying on any business operations for one year or more. The title of LLP can be struck off by the register or by the LLP in 'e-Form 24' with the consent of all partners.
E-Form 24 is used for producing an application to the Registrar of Companies for striking off the name of the LLP
The LLP must have a PAN The LLP should be inactive for at least one year or non-operational from the time of incorporation There shall be no live bank account at the time of application The LLP should have filed the latest IT returns.
The designated partners have to sign the application along with the consent of all partners.
Minimum one year has crossed after incorporation of the LLP for making an application for striking off the name of the LLP.
If LLP started operation and closed in between, all returns shall be filed until the date of service of the LLP.
In case business is originated and stopped in between, LLP shall file all Income tax returns till the date of administration. LLPs did not begin service can file closure application without filing returns.
No, once closure request is filed no need to submit any returns