Winding Up of a Limited Liability Partnership (LLP)

Winding up a Limited Liability Partnership (LLP) involves legally dissolving the entity by settling its debts, liquidating assets, and distributing remaining funds to the partners. This process can be initiated voluntarily by the partners or compulsorily by a Tribunal for reasons such as insolvency, inactivity, or non-compliance with statutory requirements. A systematic approach ensures that the interests of all stakeholders are safeguarded while complying with legal obligations.

At Taxation Point India, we provide expert guidance throughout the LLP winding-up process, ensuring adherence to legal procedures, statutory compliance, and timely execution of all necessary formalities.

What is Winding Up of an LLP?

Winding up refers to the formal closure of an LLP's operations, liquidation of assets, settlement of liabilities, and eventual dissolution as a legal entity. The process ensures a structured conclusion of business affairs and protects the interests of creditors and partners.

Legal Framework Governing LLP Winding Up

• Section 65, LLP Act 2008: Authorises the Central Government to formulate rules regarding LLP winding up and dissolution.
• Section 67, LLP Act 2008: Allows the Central Government to apply provisions of the Companies Act, 1956, to LLPs where applicable, providing flexibility in winding-up procedures.
• Notification GSR 6(E), 6th Jan 2010: Applies certain Companies Act provisions to LLP winding up.
• LLP (Winding Up and Dissolution) Rules, 2012: Specifies procedures, forms, and fees associated with LLP winding up.

Difference Between Winding Up and Dissolution

Basis	Winding Up	Dissolution
Meaning	Preparation for closure by liquidating assets and paying creditors.	Final step where the LLP ceases to exist legally after completing all procedures.
Legal Entity	Remains a legal entity and can engage in legal proceedings.	No longer exists legally; removed from ROC records.

Modes of LLP Winding Up

• Voluntary Winding Up: Partners agree to wind up the LLP based on mutual consent or specified conditions in the LLP agreement.
• Compulsory Winding Up by Tribunal: Initiated by the Tribunal due to statutory violations, insolvency, or other legally defined reasons.
• Voluntary Liquidation: LLP decides to self-dissolve when solvent, paying all debts and distributing remaining assets among partners.

Procedure for Voluntary Liquidation of LLP

• Declaration of Solvency (DOS): Majority of designated partners declare solvency via affidavit and attach audited financials and asset valuation.
• Resolution for Liquidation: LLP passes a resolution to initiate liquidation and appoints a liquidator.
• Creditors’ Approval: If debts exist, creditors representing two-thirds of the debt value must approve the resolution.
• Notification: Inform the Registrar and Insolvency & Bankruptcy Board of India (IBBI) about the resolution within seven days.
• Liquidation Commencement: The LLP ceases normal operations; the liquidator realises assets, settles debts, and deposits proceeds in a bank account titled 'LLP in Voluntary Liquidation'.
• Distribution: Proceeds are distributed among stakeholders within six months after deducting liquidation costs.

Winding Up of LLP by Tribunal

• Initiated for reasons like voluntary consent, insufficient partners, inability to pay debts, non-compliance, activities against national interest, or on just and equitable grounds.
• Petition filed with the Tribunal by partners, creditors, or the Registrar.
• Tribunal passes winding-up order and appoints a liquidator.
• Liquidator publishes public notice, verifies claims, liquidates assets, and distributes proceeds.
• Application made to the Tribunal for dissolution, followed by filing the order with the Registrar.

Insolvency Proceedings under IBC, 2016

• Initiated by LLP, creditors, or partners demonstrating inability to pay debts.
• NCLT orders a moratorium halting legal actions.
• Insolvency Resolution Professional (IRP) manages assets and drafts a resolution plan.
• Committee of Creditors (CoC) reviews and approves the plan or decides on liquidation.
• Liquidation proceeds follow priority under IBC, and LLP is dissolved after asset distribution.

Why Choose Taxation Point India for LLP Winding Up?

• Expert guidance on compliance with LLP Act, IBC, and applicable rules.
• Assistance in preparing and filing declarations, resolutions, and liquidation documents.
• Support in liquidator appointment, asset realisation, and distribution.
• Ensures timely submissions to the Registrar and regulatory authorities.
• Streamlined and transparent process, minimising legal and financial complications.

Secure a smooth and legally compliant LLP winding-up process with Taxation Point India — expert support from initiation to final dissolution of your LLP.