LLP – Limited Liability Partnership is a partnership where all or some of the partners have limited liability; it is an alternative form that gives benefits of Limited liability of the company and flexibility of a partnership. Its existence can continue irrespective of changes in partners. It can enter into contracts and can hold property in its name. LLP is a separate legal entity, and the liability of the partners is limited to their agreed contribution to the LLP. Further, no partner is held liable for the actions of other partners. Thus partners are shielded from joint liability. Further in this writing, we will discuss the LLP Strike Off procedure.
Meaning of LLP Strike Off
If an LLP wants to close down its business or the LLP is not carrying on any business operation or activity for more than one year, the LLP can make an application to the Registrar for strucking down the name of the LLP from the register of LLP.
Methods for LLP Strike Off
The provision for Strike Off is governed by the rules of Limited Liability Partnership Rules, 2017. However, LLP Strike off in the following two ways, they are
- Mandatory Striking of the LLP: The Registrar has the power to send the notice to the LLP to strike off the name from the register and request them to send their representation with-in one month from the date of the notice or if the ROC has a reasonto believe that the LLP is not doing any business for one or more preceding years and not filing its annual returns. The ROC may strike off the name from the register. This type of method is said as Mandatory Striking of the LLP.
- Voluntary Striking off the LLP: Voluntary Striking off the LLP can be done by making an application in e-Form 24 to the Registrar with the consent of all the partners of the LLP. Following are the attachment that needs to submit along with e-Form 24.
- An Affidavit duly-signed by the Designated Partners as per the prescribed format.
- An authority copy to make the application duly signed by all the partners.
- An acknowledgement copy of the latest ITR in case the ITR is filed.
- All the partner’s consent for Strike Off.
- Statement of Account disclosing all the details related to nil assets and liability.
- Detailed reasons for Strike Off and the operative status of the LLP.
- The LLP has not started business, or where it has commenced business, it ceased to do such business from ____________ (DD/MM/YYYY).
- LLP has no liabilities & indemnifies any liability that may arise even after striking off its name from the register.
- That the Limited Liability Partnership (LLP) has not opened any bank account & where it had opened, the said bank account has since been closed together with certificate(s)/statement from the respective bank demonstrating closure of bank account;
- The LLP has not filed its Income-Tax Return where it has not carried on any business since its incorporation, if applicable.
Conditions for LLP Strike off
The following conditions for the LLP to go strike off are mentioned below:
- LLP must not have any unpaid debt.
- LLP shall complete all the ROC filing till the date of making an application for Strike Off.
- LLP must be inoperative or inactive at least for one entire financial year.
Reasons for LLP Strike Off
The listed are the reasons for the LLP Strike off they are as follow:
- No compliance burden: Once the name has been removed from the register of LLP, the Director and Promoter get free from the compliance responsibility.
- Speedy Route of Closure: Inactive or non – functioning LLP can be closed by submitting FORM – 24 to the Registrar of LLP.
- Avoid Fines: If the inactive LLP is not following legal compliances, it may incur hefty penalties and fines, punishments for the officers of the LLP in some instances, including debarment of the Directors from starting another LLP. Hence, it is better to officially wind- Up an LLP that is inactive and avoid potential fines or liabilities in the future.
Process of LLP Strike Off
- STEP 1. LLP shall hold meetings of partners for approval of LLP Strike Off.
- STEP 2. Consent for all the partners is required for LLP Strike Off.
- STEP 3. If any other authority governs LLP, then approval shall be taken from that authority
- STEP 4. Once the approval is granted, the LLP has to file Form – 24 to the Registrar of companies.
- STEP 5. After an application is received, the Registrar of companies will publish a public notice. Any objection to the proposed strike-off shall be sent within 30 Days.
- STEP 6. After the said period expires, the ROC will strike off the name, and the LLP will be dissolved.
After reading this writing , it can be concluded that the LLP Strike Off can be of two types, mandatory striking of the LLP and voluntary striking off the LLP. For a voluntary strike, the consent of all partners is needed, and in case of mandatory, if the ROC thinks that the LLP should be strike off, he will send a notice to LLP with the reason to strike off.
Read our Article:Difference between Winding up & Striking off a Company in India