The penalty for LLPs defaulting in filing of any statutory return is Rs.100 per day, without any maximum limit. Hence, its is often best to windup dormant LLPs so that there is no requirement to file LLP Form 11, LLP Form 8 and Income Tax Return for the LLP each financial year to maintain compliance and avoid penalty. Hence, its best for Entrepreneurs having dormant or defaulting LLPs that are accruing penalty to use this opportunity to close the LLP.
Earlier, the LLPs were to file all their overdue returns i.e. Form 8 and 11 with concerned Registrar along with payment of additional Fees of Rs. 100 per day which used to be about Lakhs of Rupess. But, Ministry of Corporate Affairs vide Notification No. G.S.R. 470 (E) dated 16.05.2017 gave relaxation to the LLP that those LLPs which have neither carried of their business not filed any return with concerned Registrar and want to struck off their LLPs, will have to file the overdue returns of the years in which the LLPs have actually worked i.e. before the date of closure of their business i.e. the LLPs need not to file any returns for the period in which the business was actually not carrying on, however a declaration shall be given by the Designated partners w.r.t. date of closure of their business
Any LLP can close down its business by adopting any of the following two ways:
A) Declaring the LLP as Defunct
B) Winding up of LLP
HERE WE WILL DISCUSS ABOUT PROCEDURE OF CLOSING DOWN OF LLP BY DECLARING IT AS DEFUNCT
In case the LLP wants to close down its business or where it is not carrying on any business operations for the period of one year or more, it can make an application to the Registrar for declaring the LLP as defunct and removing the name of the LLP from its register of LLP’s.
eForm 24 is required to be filed for striking off the name of LLP under clause (b) of sub rule 1 of Rule 37 of LLP Rules 2008. Similarly, Registrar also has the power to strike off any defunct LLP after satisfying himself of the need to strike off and has reasonable cause. However, in this case, registrar has to send a notice to the LLP of his intention and request to send their representation within one month from the date of the notice. The Registrar shall publish such notice or content of the application made by the LLP on its website for a period of one month for the information of the general public. In case no reply is received within the mentioned period, registrar may strike off the name of LLP.
The following procedure can be followed for closing a LLP by filing Form 24:
1. LLP Form 24 can be filed only by LLPs that never commenced business or have ceased commercial activity. Hence, if the LLP is operational and the promoters wish to close the LLP, the LLP must first cease all commercial activity.
2. LLP Form 24 can be filed only by those LLP that have no creditors and no bank account AS ON date of closure of LLP with registrar. Hence, prior to filing LLP Form 24, any bank account opened in the name of the LLP must be closed and a letter evidencing closure of the bank account in the name of the LLP must be obtained from the Bank.
3. All the Designated Partners of the LLP must first execute an affidavit, either jointly or severally, that the Limited Liability Partnership ceased to carry on commercial activity from (Date) or has not commenced business.
Further, the LLP Partners must also declare that the LLP has no liabilities and indemnify any liability that may arise even after striking off its name from the Register. The liability of the Partners would not be extinguished even after closure of a LLP while using Form LLP 24.
4. Along with Form LLP 24 the income tax return of the LLP must be enclosed. Else, a copy of the acknowledgement of the latest Income-tax return filed must be attached with the application for closing the LLP.
5. After incorporation of a LLP, the LLP agreement must be filed with the MCA within 30 days of registration. In case this compliance was missed and LLP agreement was not filed, then the initial LLP agreement, if entered into and not filed, along with any amendments must be filed with late fees of Rs. 100 per day.
6. Once all the documents for filing of LLP Form 24 is prepared, a statement of accounts disclosing NIL assets and NIL liabilities, that is certified by a practicing Chartered Accountant up to a date not earlier than thirty days of the date of filing of Form 24 must be obtained.
7. The above mentioned documents along with LLP Form 24 can be then filed with the MCA to strike off name of LLP. On processing the application, if found acceptable, the concerned Registrar of Companies would cause a notice to be published on the MCA website announcing the striking off of the LLP.
NOTE TO NOTE: Ministry of Corporate Affairs vide Notification No. G.S.R. 470 (E) dated 16.05.2017 gave relaxation to the LLP that those LLPs which have neither carried of their business not filed any return with concerned Registrar and want to struck off their LLPs, will have to file the overdue returns of the years in which the LLPs have actually worked i.e. before the date of closure of their business i.e. the LLPs need not to file any returns for the period in which the business was actually not carrying on, however a declaration shall be given by the Designated partners w.r.t. date of closure of their business.
Conclusion: Its best for Entrepreneurs having dormant or defaulting LLPs, which are actually not working and upon which there is accruing penalty, to get their LLPs struck off by using the above procedure and get relief from heavy penalties of the Ministry.
(Author can be reached at firstname.lastname@example.org)