Winding up of an LLP is an easy process. This process can be initiated voluntarily or by tribunal or by striking off the LLP name by registrar. In winding up of an LLP, business assets are sold as well as creditors are paid and in event of any surplus profit or assets, they are distributed among LLP partners as per LLP agreement.
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Modes of Winding up a LLP in India
- Voluntary winding up
- Striking off
- Winding up by tribunal
Voluntary winding up
In order to pass resolution of voluntarily winding up the LLP, approval of 3/4th of the partners are needed from the total partners. The approval of lenders is also required in case LLP has lenders (either secured or unsecured) in the process of winding up of LLP. In order to start a liquidation process of an LLP, majority of the designated partners has to make a declaration ensuring that LLP has no debt and they are competent enough to pay the full debt within a period of not more than 1 year from the start of winding up of LLP. LLP has to ensure that that they are not winding up due to defraud any person or persons.
LLP must prepare declaration for winding up with statement of assets & liabilities until the most recent predictable date right before the making of declaration for winding up LLP. In case there are assets in LLP, valuation of assets are prepared by the valuator must also be submitted.
Voluntary wind up is further classified into two categories –
As per limited liability partnership (amendment) rules 2017 w.e.f 20th may 2017, the LLP rules are amended by the ministry of corporate affairs. MCA introduced LLP form 24 and by this method, the name of LLP can be easily strike off by making an application to the registrar.
Winding up by Tribunal
LLP can be wind up after the order from the tribunal court. It is also known as compulsory wind up. The court may appoint an official liquidator to wind up the affairs of their business. In case no liquidator is appointed by the court, official receiver will be the LLP liquidator. The liquidator will file the necessary notifications under the LLP act.
Reasons to Wind Up LLP
The reasons for winding up LLP by tribunal are as follows –
Procedure to Wind Up LLP
Wind Up LLP FAQ’S
The two ways by which we can voluntarily wind up an LLP are –
- Winding up of LLP voluntarily by members.
- Winding up of LLP by creditors.