Winding Up Limited Liability Partnership
Limited Liability Partnership or famously known as LLP, which is limited liability partnership, is a company where all partners have limited liabilities. Here, one partner is not responsible for other partners’ diligence or negligence.
Requirements for closing Limited Liability Partnership
Voluntary closing of LLP:
An LLP closing can be initiated voluntarily or by a tribunal. If a LLP is to initiate voluntarily closing, then the LLP must pass a resolution to shut the LLP with approval of at least three-fourths of the total number of Partners. If the LLP has lenders, secured or unsecured, then the approval of the lenders would also be required for closing of the LLP.
Compulsory closing of LLP:
This may happen due to following reasons,
- LLP wants to dissolve, as it is unable to pay its debts
- There are less than two Partners in the LLP for a period of more than six months
- LLP has acted in a fraudulent manner or against the integrity and sovereignty of India
- The LLP has not filed financial statements for preceding five consecutive years
- The tribunal is of the opinion that the LLP is equitable and that LLP should be shut.
Procedure for Limited Liability Partnership Closure
- The LLP passes a resolution to close the LLP with approval of at least 3/4th of the total number of its partners.
- Copy of the resolution shall be filed with the Registrar within thirty days of passing of such resolution
- The majority of its designated partners, being not less than two, shall make a declaration in an affidavit saying that the LLP has no debt or that it will be able to pay its debts in full within one year from the commencement of the closing.
- The affidavit and form is to be submitted to the registrar within 15 days of the resolution.
- At least 2/3rd of the value of creditor must give their consent regarding the dissolution of the LLP.
- Creditors consent must also be filed
- Within 14 days of the receipt of creditors’ consent, give notice of the resolution by advertisement in a newspaper circulating in the district where the registered office or the principal office of the LLP is situated.
- Appoint a liquidator within 30 days of receiving creditors consent. This liquidator is to file a declaration.
- Final accounts of the LLP are to be submitted
There is not much of a difference with regard to ease of closing between an LLP and a Private Limited Company.
A Private Limited Company brings certain other advantages, such as the ability to issue stock options, appoint independent directors, dilute stake to investors and valuable employees and a lot more.