Winding Up LLP

LLPs, introduced under the LLP Act of 2008 in India, represent a modern business structure. Limited Liability Partnerships can benefit from audit exemptions if their annual turnover remains below Rs. 40 lakh or the capital contribution is under Rs. 25 lakhs.

  • A Limited Liability Partnership (LLP) is a foundational business structure where partners enjoy limited liability, established under specific legal guidelines and documentation. Registering an LLP in India follows a defined procedure. While there are notable benefits to LLP registration, there are also certain drawbacks. Additionally, many individuals seek clarity on the process of dissolving an LLP. In this article, we'll delve into the steps to wind up an LLP in India.
  • Reasons for Initiating LLP Winding-up by a Tribunal:
    1) Voluntary decision by the LLP to wind up.
    2) Presence of fewer than two partners in the LLP for over six months.
    3) Inability of the LLP to settle its debts.
    4) Actions by the LLP against India's sovereignty, state security, or public order.
    5) Non-submission of LLP's financial statements or annual returns for five consecutive fiscal years to the Registrar.
    6) The Tribunal deems it fair and justifiable to wind up the LLP.
  • Voluntary Winding-up Process for an LLP:
    1) The LLP can initiate the winding-up process with consent from 3/4th of its partners. To begin, the designated partners must declare that the LLP has no outstanding debts or will settle them within a year of the winding-up commencement.
    2) Partners should also affirm that the LLP isn't winding up due to fraudulent activities. This declaration, along with an updated asset and liability statement, should be prepared before initiating the LLP's winding-up.
    3) Additionally, if assets are involved, an evaluation of pertinent LLP assets must be conducted and documented. The LLP's voluntary winding-up becomes effective upon passing the resolution to do so.
  • For initiating the dissolution of an LLP, a resolution detailing the winding-up procedure must be passed and submitted to the registrar within 30 days of its approval. This marks the official commencement of the voluntary winding-up process.
  • Once the winding-up resolution is lodged with the registrar, a majority of the partners must provide a declaration, backed by a sworn affidavit. This declaration confirms that the LLP either has no outstanding debts or will settle all debts within a specified timeframe, not exceeding one year from the winding-up initiation date.
  • Accompanying the affidavit endorsed by the majority of partners, specific documents must be submitted to the registrar within 15 days post the resolution's approval:
    1) A comprehensive statement detailing the LLP's assets and liabilities from the two most recent accounting periods up to the winding-up commencement, authenticated by a minimum of two partners.
    2) A valuation report of the LLP's assets, if applicable, conducted by a certified valuer.

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