Process to close a Limited Liability Partnership (LLP) in India By CS Annu Sharma



Dear Professionals
 
Smiles for All smile
 
In this article, we shall study the various aspects of striking off an LLP, Often; entrepreneurs are forming Limited Liability Partnerships but are not able to maintain the same. Due to adverse market situation or less business opportunity Partners fails to carry or commence the business of LLP. Also, the penalty for LLPs defaulting in the filing of any statutory return is Rs.100/- per day, without any maximum limit. Hence, it is often best to strike off/close 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.

The LLP Act, 2008 provides some important guidelines as to how one can close an LLP. The provisions of striking off of LLP are governed by Rule 37(1) of the Limited Liability Partnership Rules, 2017. Accordingly, the LLP can be stroked off in the following two ways, likewise that of a Company:

MANDATORY STRIKING OF THE LLP:

Under mandatory striking off, the ROC shall send a notice to the LLP of his intention to strike off the name of the LLP from the register and requesting them to send their representations within a period of one month from the date of the notice in the case the LLP is not carrying on any business for a period of two preceding years. Here it is important to note that the ROC shall have reasonable cause to believe that the LLP is not doing any business in case Form 8 and Form 11 is not filed for the previous two years.

VOLUNTARY STRIKING OFF THE LLP:

Under voluntarily striking off of LLP, the LLP may make an application in e-Form 24 to the Registrar with the consent of all the partners of the LLP for striking off its name from the register.

Any LLP which has been inoperative for more than 1 year or incorporated for more than One year and has no business can apply for Closure.

THE FOLLOWING PROCEDURE CAN BE FOLLOWED FOR CLOSING A LLP BY FILING FORM 24:

SERIAL

PARTICULARS

1. Complete all
the Pending Compliances.

After incorporation of an 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 that compliance must be completed.

Any overdue returns in Form 8 and Form 11 up to the end of the financial year in which the limited liability partnership ceased to carry on its business or commercial operations must be filed before filing LLP Form 24.

2.       Ensure all Statutory Dues,
if any are settled.

Prior to filing LLP Form 24, Any Dues towards statutory authorities must be clear, Return regarding Income Tax must be filed, Since the copy of the same shall be attached in the Form-24.

3. Closure of Bank Account,  if Any

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 same can be demanded by the ROC to be attached in Form.

4. Obtain Certificate from Chartered Accountant.

 

A  statement of accounts disclosing NIL assets and NIL liabilities, that is certified by a Practising Chartered Accountant up to a date not earlier than thirty days of the date of filing of Form 24 must be obtained.

5. Prepare Closure Documents.

Prepare Attachments to be attached in Form -24 as provided under the law, Further Format of Application to Close is also attached.

6. File LLP Form 24

The documents along with LLP Form 24 (Download LLP Form 24) shall be filed with the MCA to strike off the name of LLP. The Registrar, where he has sufficient cause to believe that the limited liability partnership has any asset or liability, satisfy himself that sufficient provision has been made for the realization of all amount due to the limited liability partnership and for the payment or discharge of its liabilities and obligations by the limited liability partnership, 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.

7. Surrender PAN of LLP

On Receipt of Certificate of striking off of the LLP, an Authorized person should surrender the PAN and TAN of the Limited Liability Partnership.

 
Further, it is important to note that the following shall be the attachments to e-Form 24:

  • An affidavit signed by the designated partners [as per the format has given sub-clause (b) of clause (II) of sub-rule (1A) to rule 37)];
  • Copy of the undertaking/ indemnity bond for striking off name Indemnity bond
  • Copy of authority to make the application duly signed by all the partners;
  • Copy of acknowledgment of latest ITR.
  • Consent of all the partners;
  • Consent of creditors is also needed to be filed.
  • Statements of accounts disclosing nil assets and nil liabilities certified by a Chartered Accountant in practice made up to a date not earlier than thirty days of the date of filing; and
  • Application disclosing the reasons for strike off and the operative status of the Company.
FORMAT TO ISSUE A STATEMENT OF ASSETS AND LIABILITIES BY THE CHARTERED ACCOUNTANT

In accordance with the provisions of the LLP Act, 2009, there is no fixed format for a statement of assets and liabilities of an LLP. However, in general parlance, the auditors prepare the accounts of the LLP as per the format of Form 8 and accordingly, the said format shall be followed for preparing the said statement of assets and liabilities.
 
FORMAT APPLICATION FOR CLOSURE OF LLP AS PER RULE 37(1)(B)

Date

The Registrar of Companies,
_________________
 
Sub: Application For Closure of LLP As Per rule 37(1)(b) Of The Limited Liability Partnership Rules,2009
 
Sir,
 
With respect to the subject matter cited above, it is hereby submitted that LLP M/s ABC LLP that is inoperative and has no intention to do any business or commercial activity at all in future. Thus the LLP is defunct. You are requested to strike off the name of the LLP under Rule 37(1) (b) of the Limited Liability Partnership Rule, 2009.
 
Thanking You
Yours Truly
 
For ABC LLP
 
 
Authorized Signatory/Designated Partner
 
 
FORMAT AUTHORIZATION TO MAKE APPLICATION TO STRIKE OFF
 
ABC LLP

(On the letter Head)
 
To,
 
MMMM
 
 
Sub: Authorization to make Application to Strike Off the Name of the LLP to ROC
 
Dear Sir,
 
With respect to the subject matter cited above, the management decides to authorize you to file an application to the ROC to strike off the name of the LLP from their register.
An application shall be moved with the required documents as follows:
 
  1. Application Letter
  2. Consent of all the partner,
  3. Indemnity bond/ undertaking
  4. Affidavit duly notarized
  5. Copy of statement of assets & liability duly certified
 
For ABC LLP
 
 
MMMMX
(Designated Partner)
 
 
NOW, WE SHALL DISCUSS THE IMPORTANT POINTS AFTER INTERPRETATION OF THE RELEVANT RULE WITH RESPECT TO STRIKING OFF THE LLP:

  1. Where the Limited Liability Partnership is regulated under a special law, the application for removal of name shall be accompanied by approval of the regulatory body constituted or established under that law.
  2. The contents of the notice issued the ROC and the application made by the LLP shall be placed on the website of the Ministry of Corporate Affairs for the information of the general public for a period of one month.
  3. As discussed, in case of mandatory strike off, the Registrar shall send a notice to the LLP to give a reasonable opportunity of being heard as to why the LLP shall not be dissolved. The correspondence of the said notice shall have to be made within a period of one month or else the Registrar shall strike its name off the register, and shall publish a notice in the Official Gazette thereof.
  4. The liability of every designated partner of the LLP dissolved as such shall continue and may be enforced as if the LLP had not been dissolved.
As a Key Point: The date of cessation of commercial operation is the date from which the Limited Liability Partnership ceased to carry on its revenue-generating business and the transactions such as receipt of money from debtors or payment of money to creditors, subsequent to such cessation will not form part of the revenue-generating business.
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