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Dissolution & Winding Up
Wounding up is the process to bring an end to the life of the LLP, whereby all the affairs and operations of the LLP are closed. In case of winding up, an administrator, called the liquidator, is appointed and he takes control of the LLP, collects its assets, pays debts and finally distributes any surplus among the partners in accordance with their rights. After completion of the process of winding up, the LLP is dissolved and its name is removed from the records of the Registrar of LLP. A LLP may be wound up voluntarily on its own or mandatorily by the High Court.
Voluntary Winding up: Under this, the partners may between themselves decide to stop and wound up the operations of the LLP. For voluntary Winding up the consent of atleast3/4th (in numbers) of the members is required.
A LLP instead of managing the whole winding up process on its , can resolve for winding up by Court , in which the winding up affairs shall be administered by the High Court.
*Process of voluntary winding up:
As per the provisions of the LLP Act 2008 and draft rules for winding up of LLP, the following procedure shall be adopted for voluntarily winding up of LLP:
- Approval of Partners
Atleast 3/4th (in numbers) of the Partners shall approve the proposal to wound up the affairs of the LLP.
- Affidavit by Partners
The majority of designated partners shall make a declaration supported by affidavit that the LLP has not debits or it will be able to pay off all its debts in full from the proceeds of the assets sold in winding up. The affidavit shall be accompanied by necessary documents.
- Approval of Creditors
In case the LLP has creditors, that it shall send a statement of their claims to the creditors for their consent within one month. Atleast 2/3rd in value of creditors shall agree to winding up. The consent of creditors shall be filed with the Registrar
- Publication of Resolution
Within 14 days of receipt of creditors consent , the LLP should advertise the resolution for winding up in newspaper circulating in the district , where the registered office is situated.
- Appointment of Liquidator
LLP shall with the consent of majority of partners within 30 days of filling of consent of creditors or resolution, shall appoint a LLP Liquidator from the panel maintained by the Central Government. On appointment, the powers of designated and others partners shall cease to exist.
- Discharge of Debts
The liquidator shall discharge the debts and dues of the LLP in accordance with provisions of the LLP Act.
- General Meeting
The Liquidator shall quarterly report the progress of the winding up to the partners and the creditors
- Approval of winding up accounts
After completely winding up the affairs of the LLP, the liquidator shall prepare the a report , final LLP winding up accounts and explanation showing how assets and property of LLP has been disposed off to pay discharge its debts and shall sought the approval of partners on the same either by circulation or any electronic means
- Approval by Partners
The reports , accounts of the winding up & explanations shall be approved by the atleast 2/3rd in number of the partners by passing a resolution within 30 days of receipt of report .In case the requisite number of partners are not able to approve the same , the matter shall be referred to the tribunal.
- Report to Registrar of LLP
Within 2 weeks of approval of accounts of winding up by the partner, they shall file the reports , accounts of the winding up & explanations along with the minute of their meeting to Registrar together with application to High Court of dissolution of the LLP
- Final Order by High Court
On receipt of report of official liquidator, if the High Court is satisfied that winding up process has been duly followed , he will order the winding up of the LLP.
Winding up is time consuming exercise as compared to declaring the LLP as defunct and take around 7-8 months to complete the process, lots of formalities are required to be undertaken for completing the winding up process.
*The rules relating to winding up has not been issued but as per the draft rules issued by the Ministry of Corporate for Public Suggestions
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