Winding Up – LLP

What Is Winding Up of LLP (Limited Liability Partnership)?

Winding up of an LLP (Limited Liability Partnership) refers to the legal process of closing down or terminating the business operations of an LLP. It involves the settlement of all outstanding liabilities, distribution of assets, and formal dissolution of the partnership. Winding up ensures that the LLP is officially closed in accordance with the laws and regulations set by the government, particularly under the Limited Liability Partnership Act, 2008.

Types of Winding Up for LLP:

1. Voluntary Winding Up:
   • Initiated by Partners: This type of winding up occurs when the partners of the LLP decide to wind up the business voluntarily.
   • Resolution Passed: The partners pass a special resolution to initiate the winding-up process.
   • Liquidator Appointment: A liquidator is appointed to oversee the winding-up process, which involves settling liabilities, selling assets, and distributing remaining funds to partners.
2. Compulsory Winding Up:
   • Order from Tribunal: This type of winding up occurs when a tribunal (National Company Law Tribunal or NCLT) orders the dissolution of the LLP.
   • Reasons for Compulsory Winding Up: This may happen if the LLP fails to operate in compliance with legal provisions, or if the LLP’s financial position is not stable.

Process of Winding Up – LLP:

1. Passing a Resolution:
   • For voluntary winding up, partners need to pass a special resolution to initiate the process.
2. Filing with Registrar:
   • After passing the resolution, a notice for winding up must be filed with the Registrar of Companies (RoC) within 14 days.
3. Appointment of Liquidator:
   • A liquidator is appointed to oversee the process. The liquidator is responsible for settling liabilities and managing the assets.
4. Settlement of Liabilities:
   • The LLP must settle its debts, including payments to creditors, employees, tax authorities, and other stakeholders.
5. Asset Liquidation:
   • The LLP’s assets are sold off, and the funds are used to pay liabilities. Any remaining funds are distributed among the partners.
6. Final Account and Distribution:
   • After settling liabilities and liquidating assets, the liquidator prepares the final account, which is approved by the partners.
7. Dissolution:
   • Once all procedures are completed, the final dissolution document is filed with the Registrar of Companies (RoC), officially closing the LLP.

Documents Required for Winding Up of LLP:

• Special Resolution: A resolution passed by the partners to initiate winding up.
• Form 22: A form used for filing with the Registrar of Companies for the commencement of the winding-up process.
• List of Creditors and Liabilities: A detailed list of all outstanding creditors and liabilities of the LLP.
• No Objection Certificates (NOC): Any required NOCs from financial institutions or creditors.
• Auditor’s Certificate: A certificate confirming that all accounts have been settled.

Benefits of Winding Up LLP:

• Clear Legal Closure: The LLP is legally dissolved, and no future liabilities remain.
• Distribution of Assets: Partners can legally claim their share of the business’s assets after liabilities are cleared.
• Compliance with Law: Ensures that the LLP follows proper legal procedures for closure, avoiding future legal consequences.