Voluntary Liquidation of LLP
Voluntary Liquidation of LLPs
Limited Liability Partnership (LLP) are easy to start and maintain business entities. After starting a LLP, in some cases there might be a requirement to windup or liquidate the LLP due to various reasons. LLPs can also be wound-up easily with the approval of 3/4th of the partners. In this article, we look at the procedure for winding up a LLP.
Starting the Liquidation Process
To start the liquidation process for a LLP, a greater part of the designated partners, will have to make a declaration that the LLP has no debt or that it will be competent to pay the debts in full within a period of not more than 1 year from the start of winding up.
Further, the LLP partners must declare that the LLP is not being wound up to defraud any person or persons. This declaration for winding up of the LLP must be prepared along with a statement of assets and liabilities until the most recent practicable date right before the making of declaration for winding up. A valuation of the assets related to the LLP prepared by a valued must also be submitted, if there are assets in LLP.
Voluntary winding up will be deemed to start on the date of passing of resolution for the reason of voluntary winding up. The declaration for winding up of LLP, statement of assets and liabilities and other documents for winding up of the LLP must be submitted to the Registrar of Companies within a period of 15 days from the date of passing of the resolution.
Meeting of Creditors
The consent of the creditors is to be secured for winding up of the LLP, if there are creditors. For taking the consent of creditors for winding up, a meeting of creditors can be setup by sending the declaration through registered post or speed post or any other mode to the creditors with a summary of the amount of the claims owing to each of the creditors and an offer for creditors to agree to such claim.
Appointment of LLP Liquidator
After a decision to windup the LLP, a LLP liquidator must be appointed by the Designated Partners of the Creditors. In case the LLP has no creditors, the LLP within 30 days of passing of resolution of voluntary winding up should appoint a LLP liquidator. The fee payable to the Liquidator is to be fixed and paid by the LLP.
Dissolution & Winding Up
As soon as the affairs of a LLP are completely wound up, the LLP liquidator will prepare a report mentioning the method in which the winding up has been conducted and property has been disposed off, final winding up the accounts and mentioning that the property and assets of the LLP have been disposed of and its debts completely discharged to the satisfaction of the creditors. With this report, the LLP liquidator would seek the approval of the partners or creditors of the LLP and conclude the winding up in a meeting of the Partners.
Its important to note that the accounts of the LLP liquidator will have to be audited by a Chartered Accountant. The audit of LLP liquidator accounts is not necessary if the value of total transactions during the period is Rs. 50,000 or less. If the audit is not necessary, the statements of accounts should contain a declaration that the LLP liquidator acknowledges his/her accountability for maintaining the books and records and funds are utilized only for the reason of winding up of the affairs of the LLP.