Close the LLP
An LLP can be closed, if it has not commenced business or is not engaged in the activity of business for the last 1 year. The closure application needs to be filed with the mutual consent of all the partners of the firm.
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The Limited Liability Partnership (LLP), which is not carrying on its business since its incorporation or which has terminated/stopped carrying on its business for one year or more, can apply to the Registrar for its closure and also for the removal of its name from the Register of the LLPs. If the LLP has turned dormant, then it is better to close it than fulfilling all the compliances, and it is also better to close than pay a fine or penalty in case the LLP is inactive.
Legal Provisions for Closure of LLP or Strike off of an LLP
Rule 37 of the Limited Liability Rules, 2009 deals with the striking-off name of Defunct LLP. Defunct means those LLPs which are not functioning or not operating. Hence, it is a pre-requisite that LLP must be defunct for at least 1 year before applying for closure.
It provides that “where a limited liability partnership is not carrying on any business or operation for one year or more, such LLP can make an application to the Registrar, with the consent of all partners of the limited liability partnership for striking off its name from the register”.
Limited Liability Partnership (Amendment) Rules, 2017 added sub-rule 1A after sub-Rule 1 of Rule 37 as follows:
- The LLP shall file overdue returns in Form 8 and Form 11 up to the end of the financial year in which it ceased to carry on its business or commercial operations before filing Form 24;
- Enclose along with Form 24,—
(a). An statement of account disclosing nil assets and nil liabilities, certified by a Chartered Accountant in practice made up to a date not earlier than 30 days of the date of filing of Form 24.
(b) An affidavit signed by the designated partners, either jointly or severally, to the effect:
- That the Limited Liability Partnership has not commenced business or where it commenced business, it ceased to carry on such business from (Enter Date)
- That the limited liability partnership has no liabilities and indemnifies any liability that may arise even after striking off its name from the Register.
- That the Limited Liability Partnership has not opened any Bank Account and where it had opened, the said bank account has since been closed together with certificate(s) or statement from the respective bank demonstrating closure of the Bank Account.
- That the Limited Liability Partnership has not filed any Income-tax return where it has not carried on any business since its incorporation, if applicable.
(c) A copy of the acknowledgement of the latest Income-tax return.
(d) copy of the initial limited liability partnership agreement, if entered into and not filed, along with changes thereof in cases where the Limited Liability Partnership has not commenced business or commercial operations since its incorporation.
How to close an LLP?
Limited Liability Rules, 2009 (Rule 37) explains the process regarding striking off a defunct LLP company. Defunct LLP refers to those Limited Liability Partnerships that stopped functioning or operating. Limited Liability Partnerships need to be defunct for a minimum of 1 year to be eligible for applying for LLP closure to the Registrar.
The following steps need to be followed for closing a Limited Liability Partnership by filing Form 24.
Step 1: Stop Commercial Activity
The filing of Form 24 is only possible when LLPs have not started a business yet or have stopped their commercial activity. Therefore, LLPs willing to close their companies must cease all kinds of business operations and then apply through this form.
Step 2: Close Bank Accounts
LLP closure with Form 24 can happen only when there are no open bank accounts as well as any creditors. Thus, before applying for closure with Form 24, LLPs must close bank accounts and obtain evidence of the same from the respective banks.
Step 3: Prepare Affidavits and Declaration
While closing an LLP company, all the appointed directors need to execute an affidavit (individually or jointly) stating that the LLP has stopped its commercial activity from a particular date. In case an LLP has not commenced its operations, it needs to mention that too in the affidavit.
In addition, an LLP company must declare that it has no liabilities and indemnify for losses that may come up later after striking off its name from the list of registered companies.
Step 4: Gather All the Documents
At this stage, LLPs need to accumulate important documents and submit them along with Form 24.
Step 5: File Pending Documents
Once an LLP company gets an Incorporation Certificate, it must file the LLP agreement within 30 days with the Ministry of Corporate Affairs (MCA). In case an LLP company misses to file an LLP agreement, then the company must file the initial LLP agreement (entered but not filed) with any amendments made.
LLP companies must file any overdue returns (in Form 8 and Form 11) of a financial year during which they ceased their commercial activities before filing Form 24.
Step 6: Get CA Certificate
After gathering and preparing all the required documents for filing Form 24, an LLP company must get a statement with details of accounts having NIL assets and NIL liabilities. A practising Chartered Accountant must certify this document up to a date that must fall within 30 days of the filing date of Form 24.
Step 7: File Form 24
At last, an LLP company must file all documents and the LLP closure Form 24 with MCA to complete the striking-off procedure. After verifying the documents and processing the application, if the respective authority does not find any error or discrepancy, they will issue a notice (and publish it on the MCA website) announcing the striking off of that LLP.
Documents required to close an LLP
- An application is required to be made in e-Form 24 to remove the name of the LLP, including the following:
- Address Proof of LLP
- NOC from the landlord (If the registered office place is rented, rent agreement & one utility bill (water bill, electricity bill, property tax bill, gas receipt etc.)
- A statement of accounts revealing NIL assets & NIL liabilities, made up to a date not earlier than thirty days of the date of filing of Form 24 certified by a Chartered Accountant in practice.
- Copy of acknowledgement of latest ITR- Self Explanatory
- Copy of the initial LLP agreement, along with changes thereof if entered into and not filed,
- An affidavit signed by the designated partners of LLP, either jointly/severally, to the effect: –
- That the Limited Liability Partnership has not commenced business or where it commenced business, it ceased to carry on such business.
- That Limited Liability Partnership has no liabilities and indemnifies any liability that may arise even after striking off its name from the Register.
- That the Limited Liability Partnership has not opened any Bank Account and where it had opened, the said bank account has since been closed together with certificate(s) or statement from the respective bank demonstrating closure of Bank Account;
- That the LLP has not filed any Income-tax return where it has not carried on any business since its incorporation, if applicable.
- NOC from Creditors: – NOC for strike-off to be obtained from secured creditors & Partners if any
- Copy of Detailed Application- Mention full details of LLP plus reasons for closure
- Copy of Authority to Make the Application- Duly signed by all the Partners
- Indemnity Bond: –
- The application in the form as may be prescribed must be accompanied by an Indemnity Bond given by each designated partner duly notarized about the liabilities that even after the removal of the name of such LLP, the liabilities will be met.
- Indemnity Bond should be given on the Non-Judicial Stamp Paper of an adequate value as applicable in the State where the Registered Office of the LLP is situated. Therefore, the text of the Indemnity Bond should be typed on the Non-Judicial Stamp Paper and then should be executed before the Public Notary
- Before the introduction of the LLP (Amendment) Rules, 2017, the procedure for winding up an LLP used to be extended and burdensome. On the other hand, with its introduction and introduction of LLP E-Form 24, the procedure has been made simple and easy.
In what ways we can assist?
Conducting Due Diligence: We conduct a thorough due diligence process to ensure that the LLP meets all the eligibility criteria for closure. We review the LLP agreement, tax records, compliance records, and other documents to identify any potential legal or regulatory issues that may need to be resolved before the closure process can begin.
Drafting and Filing Required Documents: We assist with drafting and filing the necessary documents with the Registrar of Companies, including the application for closure, statement of accounts, and other documents required by law.
Liquidation: We advise on the process of liquidating the LLP, which involves selling the assets, paying off creditors, and distributing the remaining assets to partners according to their shares in the LLP. We can also assist with appointing a liquidator, who will be responsible for managing the winding down process.
Compliance and Governance: We guide the LLP on compliance and governance issues during the closure process, including complying with tax and other statutory requirements, maintaining proper records, and adhering to the legal and regulatory framework.
Dispute Resolution: We assist in resolving any disputes that may arise during the closure process. We provide legal representation in court proceedings, mediations, or negotiations to resolve any issues that may arise.