What is the process of dissolution of LLP?

Process of Dissolution of an LLP in India

Dissolving a Limited Liability Partnership (LLP) in India can be necessary if the business is no longer operational or if partners decide to close the entity. LLP closure can be done voluntarily by partners or compulsorily by the law, based on certain conditions. Here’s a comprehensive overview of the process for dissolving an LLP:

1. Voluntary Dissolution through Form 24

The most common route for LLP dissolution is voluntary, especially if the LLP hasn’t commenced any business or has ceased operations for at least one year. This process is streamlined through Form 24, which allows the LLP to strike off its name from the Registrar of Companies (RoC).

Steps:

1. Partners’ Consent: The majority of partners must consent to dissolve the LLP. This resolution is documented and filed as part of the dissolution application.
2. Statement of Accounts: A recent statement of accounts, signed by a Chartered Accountant, showing no assets or liabilities, must be prepared and attached with the form. This statement should be dated within 30 days before the application submission.
3. Form 24 Submission: The LLP files Form 24 with the RoC, attaching documents including the resolution for dissolution, no-objection certificate (NOC) from creditors (if any), and the account statement.
4. Publication and Strike-Off: After a review by the RoC, the LLP name is struck off the register, completing the dissolution process.

2. Voluntary Winding-Up through Liquidation

For active LLPs with assets and liabilities, partners can choose voluntary liquidation under the Insolvency and Bankruptcy Code (IBC). This process involves asset liquidation and distribution.

Steps:

1. Special Resolution: The LLP must pass a special resolution agreeing to the dissolution, with the majority of partners’ consent.
2. Appointment of Liquidator: The partners appoint a liquidator to manage the dissolution, who will oversee debt settlement, asset liquidation, and distribution among partners.
3. Submission to RoC: The LLP submits the resolution, liquidator’s report, and final accounts to the RoC for closure.

3. Compulsory Dissolution by NCLT

When an LLP fails to meet financial or legal obligations, creditors or partners may petition for compulsory winding-up through the National Company Law Tribunal (NCLT).

Key Requirements:

• The LLP may be dissolved if it fails to file annual returns or meet financial obligations.
• The NCLT supervises the process, ensuring creditors’ dues are cleared and liabilities are settled.

In all cases, keeping up-to-date records and filing regularly during the business lifecycle simplifies the LLP closure Procedure