involves the process of winding up or dissolving the LLP. LLP closure can be voluntary or involuntary, and it is governed by the Limited Liability Partnership Act, 2008. Closing an LLP is a legal process, and it is essential to follow the prescribed procedures to avoid any legal liabilities or penalties.
1) Declaration of Solvency: In case of voluntary closure, all partners of the LLP must make a declaration of solvency, stating that the LLP will be able to pay off its debts in full within a period not exceeding one year from the commencement of the winding up.
2) Special Resolution: The partners must pass a special resolution for the winding up of the LLP. A special resolution requires the approval of at least three-fourths of the total number of partners.
3) Notice to Registrar: Within 15 days of passing the special resolution, the LLP must file a notice of resolution with the Registrar of Companies (RoC) in Form 1, along with the declaration of solvency.
4) Appointment of Liquidator: The LLP must appoint a liquidator who will be responsible for winding up the affairs of the LLP, realizing its assets, and distributing them among the partners.
5) Filing of Documents: The LLP must file various documents, including a statement of accounts and solvency up to the date of winding up, with the RoC.
6) Settlement of Liabilities: The LLP must settle all its liabilities and clear any outstanding debts before proceeding with the closure.
If the LLP is unable to pay its debts, the partners or creditors may initiate the winding up of the LLP through the National Company Law Tribunal (NCLT) under the provisions of the LLP Act.
Once the LLP is dissolved, it will cease to exist as a legal entity. The name of the LLP will be struck off from the RoC’s register, and all its assets will be realized and used to pay off its debts.
Closure of an LLP is a significant legal process that requires careful planning and adherence to the relevant provisions of the LLP Act. The partners must follow the prescribed procedures for voluntary closure or deal with any involuntary closure initiated by the NCLT.