CLOSURE OF LLP

The closure of a Limited Liability Partnership (LLP) is a formal process that involves removing the LLP’s name from the Register of LLPs maintained by the Ministry of Corporate Affairs (MCA). It is applicable when the LLP has either not commenced business since its incorporation or has ceased to operate for a continuous period of at least one year. Closing a dormant LLP is often preferred over continuing compliance and penalties.

Overview of CLOSURE OF LLP

Types

Voluntary Closure – LLP opts for closure due to inactivity or mutual decision of partners.
Compulsory Closure – Closure ordered by Tribunal or court due to non-compliance, insolvency, or other legal grounds.

Process in India

The LLP may apply for closure through either of the following mechanisms:

Strike-off using e-Form 24: The LLP files Form 24 under Rule 37 of the LLP Rules, 2008 with required documents to strike off its name from the MCA registry.
Winding Up by Tribunal: Initiated when the LLP has failed to maintain statutory requirements, has been operating against public interest, or cannot pay its debts.
Voluntary Winding Up: Initiated by partners when the LLP has no liabilities and decides to cease operations through mutual consent.

Upon submission, the Registrar publishes the notice on the MCA website for public comments. If there are no objections, the name of the LLP is removed from the register.

Importance

Ensures legal compliance and avoids penalties
Helps in officially dissolving a non-functioning business
Prevents misuse of dormant LLPs

Benefits

Saves cost on compliance and statutory filings
No penalties or legal liabilities on non-operating LLP
Ends legal existence and obligations
Peace of mind for stakeholders

Documents Required

Application in e-Form 24

Address proof of the registered office (rent agreement and utility bill)

Statement of accounts certified by a CA showing NIL assets/liabilities

ITR acknowledgment (if filed)

Copy of original and modified LLP Agreement

Affidavit by designated partners confirming closure, indemnity, and business status

Closure certificate from bank (if account was opened)

NOC from creditors and partners

Authority letter signed by all partners

Indemnity bond on non-judicial stamp paper signed and notarized by each designated partner

Procedure

Meeting & Resolution: Partners conduct a meeting and pass a resolution for closure.
Account Closure: Close all bank accounts and obtain closure certificates.
Statement Preparation: Prepare NIL statement of accounts not older than 30 days from Form 24 filing.
Affidavit & Bond: Draft and notarize affidavits and indemnity bonds by designated partners.
File e-Form 24: Submit the form with MCA along with all the required documents.
Public Notice: Registrar issues public notice on MCA site for 1 month.
Final Order: If no objection is received, the Registrar strikes off the LLP.

In case of winding up:

For Voluntary Winding Up, file resolution with the Registrar and follow the LLP Act, 2008 procedure.
For Compulsory Winding Up, the Tribunal initiates proceedings based on specific legal grounds.

Consequences

Legal existence of the LLP is terminated
Partners are discharged from further obligations
Cannot undertake any business post-closure
Liability may arise if closure procedures were not properly followed

Conclusion

Closing an LLP that is inactive or non-operational is a smart move to avoid future liabilities and non-compliance penalties. With simplified processes through e-Form 24 and the provision of voluntary or tribunal-led winding up, entrepreneurs can formally exit from the LLP structure and ensure all legal and financial duties are fulfilled.