Closure of LLP

An LLP is a partnership that is formed and incorporated under the Limited Liability Partnership Act 2008. It is a legal entity where each partner’s liability is limited to the amount that they put into the business. 

Closure of LLP means striking off its name from the register. When an LLP becomes defunct i.e., non-operating then the registrar, after following the prescribed procedure, closes the LLP. An LLP is called defunct when it has no business operation for one year or more. An LLP can also be closed if it has not commenced its business within one year of its incorporation. Closure of LLP is similar to winding up. This means that before striking off the name of LLP all the partners are required to settle all the assets and liabilities of the LLP.  

Section 75 of the LLP Act 2008 provides that where the registrar has reasonable cause to believe that an LLP is not carrying on business or operation, in accordance with the provisions of this act, the name of such LLP may be struck off the registrar of limited liability partnerships in such manner as may be prescribed. Rule 37 of the LLP Rules, 2009 provides the manner of closure of an LLP. 

Method or Procedure of Closing an LLP 

Rule 37 of the Limited Liability Rules, 2009 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 LLP for striking off its name from the registrar. The application is required to be filed in Form 24 by the LLP to the concerned jurisdictional registrar. 

The step by step procedure to close an LLP is given as follows: 

Step 1: Pass a special resolution in the meeting where partners should give their consent for closure of the LLP 

Step 2: File form 1 along with the resolution within thirty days of filing the special resolution to the MCA 

Step 3: At least two partners of the LLP shall declare that either they do not have any debt or they will settle the amount of debt within one year 

Step 4: File Form 4 along with a report showing the value of all assets of the LLP. A declaration shall also be filed that the LLP is not being closed with the intent to defraud anyone.  

Step 5: Take consent of all or at least two-thirds of the creditors regarding the closure of LLP 

Step 6: Appoint a liquidator and obtain his or her statement which needs to filed to MCA in form 6 within 14 days of the receipt of consent from creditors. 

Step 7: Finalise the books of account of the LLP and submit them to MCA in Form 9. 

Step 8: File the application of close of LLP in Form 24 to the Registrar along with the documents prescribed in the act. 

Step 9: After this, the Registrar will publish the content of the application, through a notice, on the website, for a period of one month. 

Step 10: Then within one month, the registrar will remove the name of LLP from the register. A notice will also be published in Official Gazette to legally close the LLP. 

Subrule (1A) of Rule 37(1) of the LLP Amendment Rules 2017 states that Form 24 should be enclosed with: 

• A statement of account disclosing nil assets and liabilities, certified by a chartered accountant in practice made up to a date not earlier than thirty days of the date of filing of form 24
• An affidavit signed by the designated partners, either jointly or severally, to the effect of - 
• That the LLP has not commenced business or where it is commenced, it ceased to carry on such business from……. (dd/mm/yyyy)
• That the LLP has no liabilities and indemnifying any liability that may arise even after striking off its name from the register
• That the LLP has not opened any bank account and where it had opened, the said bank account has since been closed together with certificates or statements 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.
• Copy of acknowledgment of the latest income tax return filed under the Income Tax Act, 1961, where the LLP has carried out any business and has filed such return
• Copy of the initial LLP 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. 

The following are the documents that need to be submitted by partners or designated partners: 

• Permanent Account Number of all the partners of LLP
• Aadhaar number of all partners and
• Latest  address proof of all partners 
   

Before closing an LLP it is necessary to ensure that it satisfies the following conditions: 

• The LLP has not commenced its business or if commenced, has no business operation for one year or more
• It has no assets and liabilities as of the date of application in form 24
• All the partners have given their consent for the closure 
• The LLP has filed its overdue returns in forms 8 and 11 up to the end of the financial year in which the LLP ceased to carry on its business or commercial operations 
   

Before closing an LLP it is necessary to ensure that it satisfies the following conditions: 

• The LLP has not commenced its business or if commenced, has no business operation for one year or more
• It has no assets and liabilities as of the date of application in form 24
• All the partners have given their consent for the closure 
• The LLP has filed its overdue returns in forms 8 and 11 up to the end of the financial year in which the LLP ceased to carry on its business or commercial operations