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What is LLP?
A limited liability partnership (LLP) is a combination of partnership and corporation. It is a new structure of business which facilitates the flexibility of partnership with benefit of limited liability from company at a low compliance cost.
In INDIA, limited liability partnership was introduced with Limited Liability Partnership Act,2008.
LLP has a special feature that it has separate legal entity than its members. An LLP can enter into any of the business agreement and can also raise funds on its own name. Business under LLP will not be affected by the joining or discontinuing of members. It is formed by law and work under an act, hence it can be dissolved only as per the law.
Ways to strike off of LLP
The strike off LLP is governed by Rule 37(1) of LLP Rules, 2017. There are two modes of striking off LLP which are as follows:
Mandatory Strike off of LLP by Registrar
When the Registrar finds that LLP is not carrying on any business or operations from the past 2 years or more, then it can send notice to LLP and all the partners for striking off LLP and the partners will be given a time of one month to file their representations, if any.
Voluntary Strike off of LLP by Partners
When an LLP has not been functioning from past one year or more and wants to close down its business then the LLP can apply to registrar for declaring that LLP as defunct and to remove its name from registers of LLP.
Process to Strike off LLP
The following steps are required to be followed in striking off an LLP:
Step 1 : Call Meeting of all the Partners
The LLP will call the meeting of all the partners and pass the resolution for striking off of the LLP and authorise any partner to take the actions regarding filing of application with Registrar.
Step 2 : Few Checks to be done before filing application
- Cease commercial activities : Form 24 is to be filled by those LLPs only which wants to close their business permanently. Therefore , the LLP which is operational and its promoters wants to close the LLP then the LLP has to close all its commercial activities before filling the form 24.
- Closing of bank account(s) : Before filling form 24 an LLP has to close all its bank accounts which are on its own name and has to obtain a document evidencing that the account has been closed.
- Prepare affidavits and declarations : The designated partners of the LLP must has to declare either jointly or severally, that the LLP has ceased all its commercial activities from the date or not commence any business from past one year. They also have to declare that their LLP is not having any liability or creditors and has no any indemnifying liability that may arise even after the strike off.
Step 3 : Filing of Application with Registrar
LLP needs to file an application with Registrar in LLP Form 24 for striking off of the LLP with following below mentioned documents:
Attachments of Form 24
-
- Statement of Accounts certified by CA which shall not be older than 30 days from the date of application.
- Latest Income Tax Return filed acknowledgement copy
- Bank Account Closure Certificate, if any
- Consent of Partners/Resolution for Closure of LLP
- Affidavit verifying that there are no creditors/liability
- Indemnity Bond and Affidavit for Closure of LLP
Step 4 : Confirmation by Registrar
The Registrar will verify all the documents presented by LLP and if there is no objection raised by the Registrar, they will strike off the LLP and will be intimated through mail.
FAQs for Strike off of LLP
Que. Whether it is compulsory to complete the annual filings of LLP before applying for striking off of LLP?
Ans. As per the provisions of LLP Rules, LLP has to file the forms LLP-8 and LLP-11 upto the end of financial year till which is was operating.
Que. Whether form LLP-3 regarding the LLP Agreement should be filed before striking off of LLP?
Ans. LLP act or rules doesn’t provide any exemptions regarding the filing of LLP Agreement in form LLP-3
Que. What to do in case the LLPhas not opened its bank account? Can it still file form 24?
Ans. Yes, LLP can file form -24 in case it has not opened any bank account by attaching declaration from all the partners regarding the non-opening of bank account.
- Prepare documents : Along with the form 24, an LLP must enclose the income tax return and LLP deed. A copy of acknowledgment of latest income tax return is required to be attached with the application of strike off.
- file any pending document : After registration of a LLP, a LLP agreement must be filled with MCA within 30 days of registration ,if that it enters to that agreement and is not filled then before filling of form 24 that agreement must be filled with amendments, if any.
Also any overdue returns in form 8 or form 11 up to the end of financial year in which the LLP ceases to its commercial activities must be filled before filling of form 24.
- Obtain chartered accountant certificate : Once all the documents for filing of LLP Form 24 is prepared, 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 30 days of the date of filing of Form 24 must be obtained.
- File LLP form 24 : The above mentioned documents along with LLP Form 24 can be then filed with the MCA to strike off name of LLP. On processing the application, 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.
NOTE: while using form 24 ,the liability of designated partners will not be extinguished even after the closer of LLP.
