Winding Up LLP
The LLPs are newly formed business entities that were introduced through the LLP Act,2008 in India. The Limited Liabilities enjoy the audit exemption if the annual turnover of the LLP is less than Rs40 lakh or the capital contribution is less than Rs.25 lakhs.
- The Limited Liability partnership is a basic partnership in which all the partners share limited liabilities as the LLP is set up under certain legal terms and documentation. There is a specific process as to how an individual can register his or her LLP. As there are advantages of registering as an LLP in India, there are also some disadvantages. Many of them are also unsure about the process of Winding up an LLP. Here, we are going to take a look at how to wind up an LLP in India.
- The Winding-up of the LLP is initiated by a tribunal for the following reasons:
1) The LLP wants to wind up.
2) There are less than two partners in the LLP for more than 6 months
3) The LLP is not in a position to pay debts
4) The LLP has acted against the interest of the sovereignty and the integrity of India, the specified security of the state or public order.
5) The LLP has not filed with the statement of accounts and solvency or the LLP annual returns for any five consecutive financial years with the Registrar.
6) The Tribunal thinks that is just and equitable that the LLP should windup. - Voluntary winding-up of an LLP
1) The LLP winding-up process can be easily initiated with the approval of 3/4th of the partners. To begin with the liquidation process for the LLP the designated partners need to make a declaration that the LLP does not have any debt or that the LLP will pay the debts totally within not more than 1 year from the process of winding up of an LLP. 2) Also, the LLP partners need to declare that the LLP is not winding up because of any frauds. This statement of the declaration must be prepared along with the statement of the assets and the liabilities until the most recent practicable date right before making the declaration for winding up of the LLPs.
3) Also, a valuation of the assets that are relevant to the LLP should be prepared and submitted, in case of any assets. Voluntary winding up the LLP will be effective from the start date of passing the resolution for the reason of voluntary winding up of the LLP.
- To initiate the process of winding up of an LLP a resolution for winding up the LLP should be passed and filed with the registrar within 30 days of passing the resolution for the same. The date of passing the resolution of the winding up of the LLP the voluntary winding up shall be deemed to commence.
- After the resolution for winding up of the LLP is filed with the registrar, the majority of Partners shall make a declaration that is verified by an affidavit to the effect that the LLP has no debts or that it will be in the position to pay the full debts within a period as mentioned in the declaration (This period should not exceed one year from the date of the commencement of winding up of the LLP).
- Along with the affidavit that is signed by the majority of the Partners the following documents should be filed with the registrar within 15 days of passing the resolution for winding up an LLP:
1) The statement of the assets and liabilities for the period from the last two accounts closure to date of winding up of LLP attested by at least two partners
2) Report of the valuation of the assets of the LLP prepared by the valuer if there are any.