Limited Liability Partnership may be wound up in the following ways:
1. Voluntary Winding up
2. Insolvency and Bankruptcy Code (IBC), 2016: Though this code pro- vides steps for restructuring and revival of Corporate Debtor (LLP) yet under certain circumstances NCLT can pass order for liquidation of LLP. Therefore, it is included under the modes of winding up.
3. Compulsory winding up by the Tribunal.
VOLUNTARY WINDING UP
Chapter V of part II of the Insolvency and Bankruptcy Code (IBC), 2016 provides for the various provisions for liquidation of corporate persons. According to sec. 59(1) of the code, a corporate person who intends to liquidate itself voluntarily and meets the conditions and procedural requirements as prescribed by IBBI may initiate voluntary liquidation procedure under the provisions of Chapter V of Part II of the IBC, 2016.
The various provisions of section. 35-53 of the Chapter III and Chapter IV shall apply to voluntary liquidation proceedings for corporate persons with such modifications as may be required. It further provides that if the affairs of the corporate persons have been completely wound up and its assets completely liquidated, the liquidator is required to make an application to Adjudicating Authority, i.e., NCLT for dissolution of such corporate person. The NCLT is the Adjudicating Authority who is Competent to Declare the Corporate Person as dissolved after due liquidation and distribution of its assets.
Voluntary Liquidation Regulations, 2017 issued by IBBI w.e.f. 1st April, 2017
Insolvency and Bankruptcy Board of India (IBBI). It is the most important institutional arrangement for the new insolvency and bankruptcy regime. It was established on 1st October, 2016 in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016. It was constituted as a technical committee under the IBBI Regulations, 2017.
Pre-requisites for Voluntary Liquidation as Stipulated by IBC, 2016
The following conditions are pre-requisites to be satisfied by a corporate person who wishes to opt for voluntary liquidation:
- The corporate person must be
- A declaration by majority of the designated partners affirming that the corporate person is in a position to pay all its debts in full from the proceeds of the assets to be sold in liquidation.
- The voluntary liquidation is not undertaken to defraud any person.
STEPS INVOLVED IN THE PROCESS OF VOLUNTARY LIQUIDATION
- Commencement of Liquidation
1. Obtaining declaration of solvency (DOS) [Sec. 59(3) of the Code]. A declaration of solvency duly verified by an affidavit has to be obtained from majority of designated partners of corporate person.
2. Declaration to be accompanied with documents [Sec. 59(3) of the Code]. DoS shall be accompanied by:
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- audited financial statements and record of business operations of the corporate person for the previous two years or for the period since its incorporation, whichever is later.
- a report of the valuation of assets of the corporate person, if any, prepared by a registered valuer.
- Passing of resolution [Sec. 59(3)(c) of the Code]. A resolution shall be passed by majority of the partners of corporate person for vol- untary liquidation and appointing an insolvency professional to act as liquidator within 4 weeks of obtaining the declaration.
1. Approval of voluntary winding up by the creditors [Proviso to Sec. 59(3) of the Code].
In case the LLP owes debt to any person, the creditors representing 2/3rd in value of the debt of the corporate person shall approve the resolution passed under Sec. (3)(c) of the Code within 7 days of such resolution.
1. Notification to the Registrar and IBBI. The corporate person shall notify the Registrar and IBBI about the resolution to liquidate itself within 7 days of such resolution or the subsequent approval by the creditors, as the case may be.
2. Commencement of liquidation proceedings. The liquidation proceed- ings of corporate person shall be deemed to have commenced from the date of passing of the resolution, subject to the creditors’ approval.
Effect of Liquidation
- Carrying on of Business. The corporate person shall cease to carry on its business from the liquidation commencement date except if required for the beneficial winding up of its business.
- Continuance of its Existence. The corporate person shall continue to exist until it is dissolved.
- Appointment and Remuneration of Liquidator.
6. An insolvency professional to be appointed as liquidator should satisfy the eligibility conditions laid down under Regulation 6.
7. The resolution passed under regulation 3(2)(c) or under section 59(3)(c), as the case may be, shall contain the terms and conditions of the appointment of the liquidator, including the remuneration payable to him.
- The remuneration payable to the liquidator shall form part of the liquidation cost.
Reporting. The liquidator shall prepare and submit-
1. Preliminary Report;
2. Annual Status Report;
- Minutes of consultations with stakeholders; and
1. Final Report in the manner specified under the Regulations.
- Public Announcement by the Liquidator (Regulation 14 of the Volun- tary Liquidation Regulation).
1. Form and time of announcement. The liquidator shall make a pub- lic announcement in Form A of Schedule I within 5 days of his appointment.
2. Contents of announcement. The announcement shall invite the stake- holders to submit their claims due to the corporate person within 30 days from the liquidation commencement date.
- Mode of publishing of announcement. The announcement shall be published:
1. In one English and one regional language newspaper with wide circulation at the location of the registered office and princi- pal office, if any, of the corporate person;
2. On the website, if any, of the corporate person; and
3. On the website, if any, designated by IBBI for this purpose.
- Verification of Claims.
Chapter V of VL Regulations provides for the manner of submission of claims by creditors including workmen and employees and secured credi- tors), determination of amount of claims, foreign currency claims, verifica- tion of claims etc.
According to Section 40 of the Code, The liquidator shall verify the claims submitted within 30 days from the last date for receipt of claims and may either admit or reject the claim, wholly or partially, as the case may be.
- Realization of Assets.
- Manner of sale. It may be noted that VL Regulations allow the liqui- dator to value and sell the assets of the corporate person in the manner and mode approved by the corporate person.
- Recovery of monies due: The liquidator shall make an effort to re- cover and realize all assets and dues to the corporate person in a time-bound manner keeping in mind the interest of the stakehold- ers.
- Realization of unpaid capital contribution. The liquidator shall re- alize the unpaid capital contribution from the partners who have not yet paid .
- Deposit and Distribution of Proceeds of Liquidation (Regulation 35 of Liquidation Regulation).
The liquidator shall open a bank account in the name of the corporate person followed by the words ‘in voluntary liquidation’ in a scheduled bank and deposit all monies received on behalf of corporate person.
The liquidator shall distribute the proceeds from realization within 6 months from the receipt of the amount to the stakeholders. The proceeds shall be distributed after deducting the liquidation cost therefrom.
ANNUAL FILLING
LP is required to file LLP Form 8 (Statement of Account & Solvency) and LLP Form 11 (Annual Return) annually. The ‘Annual Return’ is required to be filed within 60 days of close of the financial year and ‘Statement of Accounts & Solvency’ shall be filed within 30 days from the end of six months of the financial year to which it relates. Every LLP has to maintain uniform financial year ending on 31st March of a year.
Every LLP is required to file ‘Statement of Accounts & Solvency’ in prescribed LLP Form 8 which contains a declaration on the state of solvency of the LLP by the designated partners and also information related to statement of assets and liabilities and statement of income and expenditure of the LLP. This form has to be filed by the LLP on an annual basis.
ANNEXURES
ANNEXURE-1
DRAFT LLP AGREEMENT
AGREEMENT
(As per Section 23(4) of LLP Act, 2008)
THIS Agreement of LLP made at Jalandhar on this _______ Day of January, 2018 BETWEEN
1. ————————which expression shall, unless it be repugnant to the subject or context thereof, include their legal heirs, successors, nominees and permitted assignees and hereinafter called the FIRST PARTY,
2. _______________which expression shall, unless it be repugnant to the subject or context thereof, include their legal heirs, successors, nominees and permitted assignees and hereinafter called the SECOND PARTY.
(ALL THE ABOVE PARTIES SHALL BE COLLECTIVELY REFERRED TO AS PARTNERS)
NOW The First & Second are interested in forming a Limited Liability Partnership under the Limited Liability Partnership Act 2008 and that they intends to write down the terms and conditions of the said formation and IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS: –
1. A Limited Liability Partnership shall be carried on in the name and style of M/s. EXCELLA LLP and hereinafter called as EXCELLA LLP.
2. The EXCELLA LLP shall have its registered office at LOWER GROUND FLOOR, JALANDHAR PUNJAB and/or at such other place or places, as shall be agreed to by the majority of the partners from time to time.
3. The Contribution of the EXCELA LLP shall be Rs. 5,00,000 (Rupees Five Lakh only) which shall be contributed by the partners in the equal proportions as per the needs of EXCELLA LLP. The further Contribution if any required by the EXCELLA LLP shall be brought by the partners in their profit sharing ratio.
4. The EXCELLA LLP shall have a common seal to be affixed on documents as defined by partners under the signature of any of the Designated Partners.
5. All the Partners of the EXCELLA LLP are entitled to share profit and losses in the equal ratio.
6. The business of the EXCELLA LLP shall be following:
TO CARRY ON THE BUSINESS AND PROVIDING SERVICES RELATED TO TELECOMMUNICATION INFRASTRASTRUCTURE AND NETWORK AND THEIR COMPONENTS,EQUIPMENTS AND SPARE PARTS
Admission of New Partner
7. No Person may be introduced as a new partner without the written consent of all the existing partners. Such incoming partner shall give his prior consent to act as Partner of the EXCELLA LLP.
8. The Contribution of the partner may be tangible, intangible, Moveable or immoveable property and the incoming partner shall bring minimum contribution as unanimously decided by the existing partners.
9. The Profit sharing ratio of the incoming partner will be as unanimously decided by the existing partners.
Rights of Partner
10. All the partners hereto shall have the rights, title and interest in all the assets and properties in the said EXCELLA LLP in the proportion of their Contribution.
11. Every partner has a right to have access to and to inspect and copy any books of the EXCELLA LLP.
12. Each of the parties hereto shall be entitled to carry on their own, separate and independent business, after taking the written permission of all the partners, as hitherto they might be doing or they may hereafter do as they deem fit and proper and other partners and the EXCELLA LLP shall have no objection thereto provided that the said partner has intimated the said fact to the EXCELLA LLP before the start of the independent business and moreover he shall not uses the name of the EXCELLA LLP to carry on the said business.
13. EXCELLA LLP shall have perpetual succession, death, retirement or insolvency of any partner shall not dissolve the EXCELLA LLP.
14. On retirement of a partner, the retiring partner shall be entitled to full payment in respect of all his rights, title, goodwill and interest in the partner as herein provided. However, upon insolvency of a partner his or her rights, title and interest in the EXCELLA LLP shall come to an end. Upon the death of any of the partners herein any one of his or her heirs will be admitted as a partner of the EXCELLA LLP in place of such deceased partner. The heirs, executors and administrators of such deceased partners shall be entitled to and shall be paid the full payment in respect of the right, title, goodwill and interest of such deceased partner.
15. On the death of any partner, if his or her heir opts not to become the partner, the surviving partners shall have the option to purchase the contribution of the deceased partner in the EXCELLA LLP.
16. All the partners shall actively involve in the business of EXCELLA LLP.
Duties of Partners
17. Every partner shall account to the limited liability partnership for any benefit derived by him without the consent of the limited liability partnership from any transaction concerning the limited liability partnership, or from any use by him of the property, name or any business connection of the limited liability partnership.
18. Every partner shall indemnify the limited liability partnership and the other existing partner for any loss caused to it by his fraud or wilful negligence in the conduct of the business of the limited liability partnership.
19. Each partner shall render true accounts and full information of all things affecting the limited liability partnership to any partner or his legal representatives.
20. In case any of the Partners of the EXCELLA LLP desires to transfer or assign his interest or shares in the EXCELLA LLP, she/he has to offer the same to the remaining partners by giving 15 days notice. In the absence of any communication by the remaining partners the concerned partner can transfer or assign his share in the market.
21. No partner shall without the written consent of the EXCELLA LLP.,-
22. Employ any money, goods or effects of the EXCELLA LLP or pledge the credit thereof except in the ordinary course of business and upon the account or for the benefit of the EXCELLA LLP.
Lend money or give credit on behalf of the EXCELLA LLP or to have any dealings with any persons, company or firm whom the other partner previously in writing have forbidden it to trust or deal with. Any loss incurred through any breach of provisions shall be made good with the EXCELLA LLP by the partner incurring the same.
Enter into any bond or becomes surety or security with or for any person or do knowingly cause or suffer to be done anything whereby the EXCELLA LLP property or any part thereof may be seized.
Assign, mortgage or charge his or her share in the EXCELLA LLP or any asset or property thereof or make any other person a partner therein.
Compromise or compound or (except upon payment in full) release or discharge any debt due to the EXCELLA LLP except upon the written consent given by the other partner.
Meeting
23. All the matters related to the EXCELLA LLP as mentioned in this agreement shall be decided by a resolution passed by a majority in number of the partners, and for this purpose, each partner shall have one vote.
24. The meeting of the Partners may be called by sending 10 days prior notice to all the partners at their residential address or by mail at the Email ids provided by the individual Partners in written to the EXCELLA LLP. In case any partner is a foreign resident the meeting may be conducted by serving 15 days prior notice through email. Provided the meeting be called at shorter notice, if majority of the partners agrees in writing to the same either before or after the meeting.
25. The meeting of Partners shall ordinarily be held at the registered office of the EXCELLA LLP or at any other place as per the convenience of partners.
26. With the written Consent of all the partners, a meeting of the Partners may be conducted through Teleconferencing.
27. Every limited liability partnership shall ensure that decisions taken by it are recorded in the minutes within thirty days of taking such decisions and are kept and maintained at the registered office of the EXCELLA LLP.
28. Each partner shall– I. Punctually pay and discharge the separate debts and engagement and indemnify the other partners and the EXCELLA LLP assets against the same and all proceedings, costs, claims and demands in respect thereof. II. Each of the partners shall give time and attention as may be required for the fulfilment of the objectives of the EXCELLA LLP business and they all shall be the working partners.
Duties of Designated Partner
29. The Designated Partners shall be responsible for the doing of all acts, matters and things as are required to be done by the limited liability partnership in respect of compliance of the provisions of this Act including filing of any document, return, statement and the like report pursuant to the provisions of Limited Liability Partnership Act, 2008.
30. The Designated Partners shall be responsible for the doing of all acts arising out of this agreement.
31. The EXCELLA LLP shall pay such remuneration to the Designated Partner as may be decided by the majority of the Partners, for rendering his services as such.
32. The EXCELLA LLP shall indemnify and defend its partners and other officers from and against any and all liability in connection with claims, actions and proceedings (regardless of the outcome), judgment, loss or settlement thereof, whether civil or criminal, arising out of or resulting from their respective performances as partners and officers of the EXCELLA LLP except for the gross negligence or wilful misconduct of the partner or officer seeking indemnification.
Cessation of existing Partners
33. Partner may cease to be partner of the EXCELLA LLP by giving a notice in writing of not less than thirty days to the other partners of his intention to resign as partner.
34. No majority of Partners can expel any partner except in the situation where any partner has been found guilty of carrying of activity/business of EXCELLA LLP with fraudulent purpose.
35. The EXCELLA LLP can be wounded up with the consent of all the partners subject to the provisions of Limited Liability Partnership Act 2008.
Extent of Liability of EXCELLA LLP
36. EXCELLA LLP is not bound by anything done by a partner in dealing with a person if—
The partner in fact has no authority to act for the EXCELLA LLP in doing a particular act; and The person knows that he has no authority or does not know or believe him to be a partner of the EXCELLA LLP.
Miscellaneous Provisions
37. The limited liability partnership shall indemnify each partner in respect of payments made and personal liabilities incurred by him— I. in the ordinary and proper conduct of the business of the limited liability partnership; or II. in or about anything necessarily done for the preservation of the business or property of the limited liability partnership.
38. The books of accounts of the LLP shall be kept at the registered office of the EXCELLA LLP for the reference of all the Designated Partners.
39. The accounting year of the EXCELLA LLP shall be from 1st April of the year to 31st March of subsequent year. The first accounting year shall be from the date of commencement of this EXCELLA LLP till 31st March of the subsequent year.
40. It is expressly agreed that the bank account of the EXCELLA LLP shall be operated by any of the party or mutually agreed by majority of the partners. All the partners may authorise any other employee(s) to operate the account.
41. All disputes between the partners or between the Partner and the EXCELLA LLP arising out of the limited liability partnership agreement which cannot be resolved in terms of this agreement shall be referred for arbitration as per the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996).
42. The partners shall be entitled to Monthly Remuneration as under:
Sr. No. Name Monthly Remuneration
43. Any clause in this agreement may be added or deleted with the mutual consent of all the Designated Partners.
44.The LLP can take over the existing business/business(s) IN WITNESS WHEREOF the parties have put their respective hands the day and year first hereinabove written
Signed and delivered by the
For and on behalf of
EXCELLA LLP
FIRST PARTY____________________
SECOND PARTY__________________
WITNESSES:-
Signature___________________
Name______________________________
Father’s Name______________________
Address:__________________________
___________________________________
Occupation__________________________
Signature___________________
Name______________________________
Father’s Name______________________
Address:__________________________
___________________________________
Name______________________________
Father’s Name______________________
Address:__________________________
___________________________________
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