The Tribunal might decide to initiate the winding up of an LLP for the below-mentioned reasons:
- The Tribunal holds that it is equitable and just for the LLP to be wound up
- The LLP has requested to be shut down
- The LLP has had less than 2 partners for a time period exceeding six months
- The LLP has become insolvent or bankrupt
- The LLP’s actions harmed the integrity and sovereignty of India or caused security/public order issues.
- The LLP hasn’t filed its Annual Returns or Statement of Accounts & Solvency with the Registrar for the preceding 5 consecutive years.
Winding Up of LLP Procedure
The process starts by approving and filing a resolution with the Registrar seeking the closure of the LLP within a period of thirty days from the date of approval of this resolution. The voluntary winding-up procedure will be declared to have commenced from the date this resolution has been passed. This resolution is to be then filed with the Registrar along with a declaration & affidavit by a majority of the LLP’s partners that the entity does not have any debt or that it’s capable of paying off all its debts within a specified period, stated in this declaration. However, the period should not exceed 1 year from the commencement date of the winding-up procedure of the LLP. Apart from the affidavit that’s to be signed, these documents should also be filed and submitted to the Registrar of Companies within a period of fifteen days from the date of passing the resolution for the LLP’s dissolution.
- A statement of assets & liabilities for the period starting from the date of closure of accounts to the date of dissolution of the LLP that is attested by a minimum of 2 partners
- A valuation report, containing details about the LLP’s assets, prepared and filed by a competent valuation expert.
Winding up of LLP with Creditors
In case the LLC facing dissolution has any unsecured or secured creditors, the approval of these creditors must be requested before the dissolution procedures for the LLP can be set into motion. Creditors must offer their opinion regarding the dissolution of the LLP within a period of thirty days from the date of receipt of request seeking their approval for dissolution. If all the partners and creditors approve of the dissolution, the LLP is allowed to start its voluntary dissolution procedures.
Appointment of LLP Liquidator
The appointment of an LLP Liquidator must be done within a period of 30 days of the approval of the resolution to commence voluntary dissolution procedures. If the LLP has any creditors, the LLP Liquidator’s appointment is held to be valid only when approved by a 2/3rd
majority of the firm’s creditors, based on the value of the debt they hold. It is the LLP Liquidator’s duty to carry out the duties and functions for the dissolution of the LLP. The Liquidator shall adjust the partners’ rights and settle the LLP’s creditors. During the discharge of his duties, the Liquidator is also required to keep the necessary books of accounts that pertain to the LLP’s dissolution.
Filing of The Dissolution Report by The LLP Liquidator
After the LLP’s affairs have been completely wound up, the Liquidator has to create a report that details how the dissolution was conducted and how the LLP’s properties have been sold or disposed of. Provided 2/3rd
of the creditors in value and partners have approved of the LLP Liquidator’s dissolution report, a resolution seeking winding up of the accounts & an explanation for the firm’s dissolution has to be approved by the firm’s partners. The Liquidator is then required to submit the resolution and the LLP’s winding up reports to the Registrar & submit an application for dissolution to the Tribunal.
Dissolution of the LLP
After the Tribunal has been satisfied that all prescribed procedures were followed during the winding up of the LLP, it shall issue an order approving the dissolution of the LLP. The Liquidator shall file this order’s copy with the Registrar in order to wind up the LLP. After the Registrar has received the order issued by the Tribunal approving the dissolution, the Registrar shall then issue a notice proclaiming the dissolution of the LLP in the Official Gazette.