In India, Limited Liability Partnership (LLP) can be closed by following simple process of Striking off the name of defunct LLP having no business or commercial activities since last 1 year. The pre-condition to use this strike off method of closing is that the LLP must have no assets and no liabilities before strike off application. Designated partners are need to first settle the accounts of LLP by selling the assets, if any and pay off the liabilities, if any. Based on NIL Assets and Liabilities and based on no objections →from the general public, Registrar will close the LLP.
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Legal Provisions for Closing of LLP in India
Rule 37 of the Limited Liability Rules, 2009 deals with the striking off name of Defunct LLP. It provides that “where a limited liability partnership is not carrying on any business or operation for a period of 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“.
Pre-conditions before Closure of LLP
- 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;
- LLP shall file Income Tax return upto the year in which it carries on business or commercial activities;
- LLP shall ensure that there is no business or commercial transactions in preceding 1 year;
- LLP shall sell of all its assets and pay all its liabilities before making an application;
- LLP shall close all its bank accounts before filing application;
- LLP shall ensure that initial LLP Agreement has been filled with the RoC.
Process of closure of LLP or Strike off of an LLP
1. Pass a Designated Partner resolution for applying for Strike off of LLP;
2. Take written consent of all the partners of LLP for strike off of LLP;
3. Close all Bank Account of the LLP;
4. Sell the assets, if any and pay off the liabilities, if any;
5. Drafting of all the requisite documents for closure of LLP;
6. Filing of e-Form 24 with the Registrar with following attachments;
→ Application for closure of LLP.
→ 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;
→ Affidavit signed by the designated partners, either jointly or severally, to the effect:
→ Copy of the acknowledgement of the latest Income-tax return;
→ Copy of the initial limited liability partnership agreement, if entered into and not filed, along with changes thereof in cases where the LLP has not commenced business or commercial operations since its incorporation.
→ Consent of all partners.
The application fee for filing e-Form 24 is Rs.500/-. Once, the e-form 24 is filled by the LLP to concerned jurisdictional Registrar, it has to wait for approval from the Registrar. Registrar may ask for any additional documents for his satisfaction. Once, Registrar is satisfied, he shall send name of the LLP for publication in official gazette asking to raise objections from general public. If no objection is received in a prescribed time period, Registrar will strike off the name of LLP from its register.
Some FAQs with regard to closure of LLP or Strike off of an LLP
1. Which date one should reckon for cessation of business?
The date of cessation of commercial operation is the date from which the Limited Liability Partnership ceased to carry on its revenue generating business and the transactions such as receipt of money from debtors or payment of money to creditors, subsequent to such cessation will not form part of revenue generating business.
2. Whether up to date annual filing is required for closure of LLP?
As per LLP Amendment Rules, 2017, annual filing forms like form 8 and 11 is required to be filled up to the date of financial year in which LLP ceased to carry on business or operation. For e.g: LLP ceased the business on 31st August, 2018 then form 8 and 11 needs to filled for F.Y upto 2018-19.
3. What if Initial LLP Agreement is not filled?
As per LLP Amendment Rules, 2017, initial agreement is not filled and LLP is inoperative since incorporation then application for strike off is allowed if LLP Agreement is filled at the time of strike off but if LLP has commenced business and LLP Agreement is not filled then LLP must file LLP Agreement in form 3 before filing application for strike off.
4. What if Income Tax return is not filled?
As per LLP Amendment Rules, 2017, Income tax return is required to be filled up to the date of financial year in which LLP ceased to carry on its business or operation. If LLP is not commenced business since incorporation then filing of IT return is not required and LLP can directly apply for strike off.
Conclusion
It is pertinent to note that strike off is not the legal end of the LLP just like winding up. Designated partners have to file Indemnity, for security of future liabilities, while making an application for strike off. In case any future liabilities or obligations arise, designated partners are personally liable for that which is not the case of winding up. So it is always advisable to first set off all kinds of liabilities, disputes etc. in order to save oneself from future liabilities.
(Republished with amendments)
Author Bio
LLP Clouser