Winding Up of LLP
Winding up is the process, where all the assets of the business are sold to paying off creditors and distributing surplus if any, among the owners of the business. An LLP may decide to wind up its business by two modes, either by voluntarily winding up or compulsory winding up.
Voluntary closing of LLP:
An LLP closing can be initiated voluntarily or by a tribunal. If a LLP is to initiate voluntarily closing, then the LLP must pass a resolution to shut the LLP with approval of at least three-fourths of the total number of Partners. If the LLP has lenders, secured or unsecured, then the approval of the lenders would also be required for closing of the LLP.
Compulsory closing of LLP:
This may happen due to following reasons,
- LLP wants to dissolve, as it is unable to pay its debts
- There are less than two Partners in the LLP for a period of more than six months
- LLP has acted in a fraudulent manner or against the integrity and sovereignty of India
- The LLP has not filed financial statements for preceding five consecutive years
- The tribunal is of the opinion that the LLP is equitable and that LLP should be shut