The LLPs are newly formed business entities that were introduced through the LLP Act, of 2008 in India. The Limited Liabilities enjoy the audit exemption if the annual turnover of the LLP is less than Rs40 lakh or the capital contribution is less than Rs.25 lakhs.
The Limited Liability Partnership is a basic partnership in which all the partners share limited liabilities as the LLP is set up under certain legal terms and documentation. There is a specific process as to how an individual can register his or her LLP. As there are advantages to registering as an LLP in India, there are also some disadvantages. Many of them are also unsure about the process of Winding up an LLP. Here, we are going to take a look at how to wind up an LLP in India.
Section 63,64 and 65 of the LLP Act,2008 regulates the process of winding up the LLP. The Limited Liability Partnership winding up can be initiated voluntarily or by a tribunal. Let us take a look at both in detail.
The Winding-up of the LLP is initiated by a tribunal for the following reasons:
The LLP winding-up process can be easily initiated with the approval of 3/4th of the partners. To begin with the liquidation process for the LLP the designated partners need to make a declaration that the LLP does not have any debt or that the LLP will pay the debts totally within not more than 1 year from the process of winding up an LLP.
Also, the LLP partners need to declare that the LLP is not winding up because of any fraud. This statement of the declaration must be prepared along with the statement of the assets and the liabilities until the most recent practicable date right before making the declaration for winding up of the LLPs.
Also, a valuation of the assets that are relevant to the LLP should be prepared and submitted, in case of any assets. Voluntary winding up of the LLP will be effective from the start date of passing the resolution for the reason of voluntary winding up of the LLP.
To initiate the process of winding up an LLP a resolution for winding up the LLP should be passed and filed with the registrar within 30 days of passing the resolution for the same. On the date of passing the resolution of the winding up of the LLP, the voluntary winding up shall be deemed to commence.
After the resolution for winding up of the LLP is filed with the registrar, the majority of Partners shall make a declaration that is verified by an affidavit to the effect that the LLP has no debts or that it will be in the position to pay the full debts within a period as mentioned in the declaration (This period should not exceed one year from the date of the commencement of winding up of the LLP).
Along with the affidavit that is signed by the majority of the Partners the following documents should be filed with the registrar within 15 days of passing the resolution for winding up an LLP:
The majority of the partners are needed to announce Form 2 stating that they have no sum unpaid or that they will clear the debts within a specified period but not exceedingly more than a year from the date of passing the resolution for the sake of winding up.
Now after passing the resolution of winding up and receiving the consent from the creditors for winding up within 14 days, the LLP is required to publish an advertisement regarding the resolution of the winding up in a newspaper that is circulated in the territory where the registered office is located or where the office of the LLP is registered.
After the approval from a majority of the partners is obtained through the resolution, a voluntary liquidator as the LLP liquidator is appointed with fixed remuneration. The liquidator will be appointed only after the approval of 2/3rd of the creditors in the value of the LLP.
The creditors also have a choice to nominate an LLP liquidator and in case of the instantaneous appointment by the creditors and the partners, the LLP liquidator that is appointed by the creditors will come into existence. If the liquidator is acting then the tribunal will be appointing an LLP liquidator.
After the affairs of the LLP are fully wound up, the LLP liquidator will need to prepare a report that states how the winding-up of the LLP has been conducted and the property of the LLP has been disposed of.
In case two-thirds of the Partners and creditors in value are satisfied with the report of winding up that is prepared by the LLP liquidator, then a resolution for winding up the accounts and the explanation for the dissolution must be passed by the partners.
The LLP liquidator is then required to send this LLP winding up report along with the resolution to the Registrar and file an application with the tribunal.
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