A LLP Closure Procedure in India

Starting a business as a Limited Liability Partnership (LLP) in India is an exciting step, but there may come a time when shutting it down becomes necessary. If your LLP is no longer active or you want to close it, it’s important to understand the proper way to do so. Many business owners worry about rising compliance costs, penalties for missing filings, and the legal challenges involved in closing an LLP. Not following the correct procedure can lead to ongoing liabilities and trouble with regulators.

This simple and complete guide, created by the legal experts at Rest The Case, will explain the LLP closure procedure in India in a clear and easy-to-follow way. We will guide you through the entire process, from picking the right closure method to filing the final forms with the Ministry of Corporate Affairs (MCA) through the new C-PACE system. Our goal is to give you accurate and practical advice so you can close your LLP with confidence and avoid future troubles.

Why Should You Close an LLP? The Importance of Saying Goodbye Properly

It’s important to officially close an LLP because it stops all the ongoing responsibilities and problems that come with keeping it registered. If you don’t close it properly, you might keep getting fines, get into trouble with the law, or have partners face penalties. Closing it means everything is finished in the right way, and no one has to worry about it anymore.

Common Reasons People Close an LLP:

• The business never really started or made any money.
• The business is losing money and can’t keep going.
• The partners don’t agree with each other and decide to end things.
• The LLP was created for a specific goal, which is now complete.

What Happens If You Don’t Close an LLP Officially?

• You will have to keep paying penalties for not submitting important reports to the government.
• The partners in charge might get banned from managing LLPs because of the mistakes.
• The government could mark the LLP as inactive (defunct), which might cause legal troubles.
• The partners could be responsible for any debts or legal issues that arise if the LLP stays open.

To avoid all these problems, it’s best to formally close the LLP by following the right steps, like filling out the right forms and making sure all debts and obligations are cleared.

Choosing the Right Path: Striking Off vs. Winding Up of an LLP

Certainly! Here is the simple comparison between striking off and winding up an LLP, presented in a clear table format:

The Step-by-Step Guide to Striking Off an LLP (Using Form 24)

Striking off an LLP is the official way of shutting down a Limited Liability Partnership that is no longer running its business. Instead of letting the LLP remain dormant and accumulate compliance penalties, the Ministry of Corporate Affairs (MCA) allows partners to voluntarily close it using Form 24. This provides a clean exit and helps entrepreneurs focus on new ventures without unnecessary legal baggage.

Since 27 August 2024, voluntary strike-off applications in LLP Form 24 are processed centrally by the Registrar, C-PACE (Centre for Processing Accelerated Corporate Exit), instead of the local RoC. Winding-up remains under the LLP Winding-up Rules before the NCLT.

Pre-requisites: Are You Eligible for a Strike-Off?

Before applying for strike-off under Form 24, the LLP must carefully check the following conditions:

• Inactive for at least one year – The LLP should not have carried out business activities for a minimum of one year since incorporation or since it stopped operations.
• Cessation of commercial activities – No trading, service, or business activity should be ongoing under the LLP.
• Closure of bank accounts – All current or savings accounts opened in the name of the LLP must be formally closed, with closure proofs available.
• Compliance filings completed – All overdue returns (Form 8 – Statement of Account & Solvency, and Form 11 – Annual Return) must be filed up to the financial year in which the LLP last conducted business.
• CA-certified Statement of Accounts – The Statement of Accounts submitted with Form 24 must be certified by a Chartered Accountant and must be not older than 30 days on the date of filing.
• No pending liabilities – The LLP must settle all debts, dues, and obligations to creditors, employees, or vendors before applying.

Documents Required for LLP Strike-Off

• Application for Striking Off (Form 24)- This is the main form you need to file with the government to officially ask for your LLP to be removed from the register. It contains details about the LLP and the reasons for closure.
• Consent of All Partners- All the partners involved in the LLP must agree to close it. You need a written statement or resolution from every partner showing they approve the strike-off.
• Affidavit and Indemnity Bond from All Designated Partners (Duly Notarized)- An affidavit is a sworn statement by the designated partners saying that the LLP is not carrying on any business and has no debts. An indemnity bond is a promise that if any issues or liabilities come up later, the partners will take responsibility. These legal papers must be signed in front of a notary public to be valid.
• Statement of Accounts Certified by a Chartered Accountant (Showing Nil Assets and Nil Liabilities)-A Chartered Accountant (CA) needs to prepare and certify financial statements proving the LLP has no assets (properties, money) and no liabilities (debts) left. This certificate should be recent, usually not older than 30 days from the filing date.
• Copy of the Latest Income Tax Return (If Filed)-If the LLP has filed income tax returns, provide a copy of the most recent one as proof that tax compliance is maintained.
• Copy of the LLP Agreement and Any Amendments-Include the original LLP agreement document along with any changes or updates made to it over time. This shows the official rules agreed upon by the partners.
• Bank Account Closure Certificate-Proof that all the bank accounts in the LLP’s name have been closed. The bank issues this certificate to confirm that no money transactions occur after business hours.
• PAN Card of the LLP- A copy of the LLP’s Permanent Account Number (PAN) card is required as official proof of identity of the LLP. By collecting and submitting these documents correctly, the LLP can be formally struck off the official register, meaning it is legally closed and no longer exists. This helps ensure there are no future legal or financial troubles concerning the LLP.

The 5-Step Procedure to Strike Off an LLP

Closing an LLP in India requires following a proper legal process to make sure everything is settled and recorded correctly.

Step 1: Get Agreement from All Partners

All partners of the LLP must formally agree to shut it down. This usually involves passing a resolution in a partners’ meeting. Without clear majority consent, you cannot proceed.

Step 2: Pay Off All Debts and Close Bank Accounts

Before filing for closure, make sure all outstanding dues - loans, taxes, vendor payments, or employee obligations - are cleared. After that, close all the bank accounts held in the LLP’s name and obtain closure certificates from the bank.

Step 3: Collect the Necessary Documents

Prepare the documents required for Form 24, including:

• A CA-certified Statement of Accounts not older than 30 days on the date of filing.
• Proof of filing all overdue Form 8 (Statement of Account & Solvency) and Form 11 (Annual Return) up to the financial year of cessation.
• Affidavits and indemnity bonds signed by partners confirming there are no liabilities.
• Bank account closure proof and other supporting records.

Step 4: Submit Form 24 Online

File the strike-off application in Form 24 through the MCA portal. Upload the required documents and pay the government filing fee - ₹500 for Small LLPs and ₹1,000 for all other LLPs (as displayed on MCA at checkout, subject to revision).

Step 5: Statutory Public Notice & Dissolution

Once the application is accepted, C-PACE issues a public notice of the proposed strike-off on the MCA website and in the Official Gazette. This notice remains open for a mandatory one-month period to allow objections. If no valid objections are raised during this statutory window, the LLP’s name is formally struck off the register, and the entity is treated as legally dissolved.

This process helps to make sure everything is clear and done properly when shutting down an LLP, for avoiding future problems.

Understanding the Voluntary Winding Up Process of an LLP

This section explains how an LLP can be closed through a formal process called voluntary winding up. It covers the steps partners need to follow when they decide to end the LLP’s business in an organized and legal way.

When is Winding Up Necessary?

Winding up becomes necessary when the LLP has important assets and debts that must be properly handled or when partners cannot work together and need legal help to close the business fairly. This part describes the main situations where winding up is the right choice.

• When the LLP has significant assets and liabilities that need systematic liquidation:
  This means if the LLP owns property, money, or other valuable things, and also owes money or has debts, winding up is needed to properly sell those assets and pay off the liabilities in an organized way.
• In case of partner disputes that necessitate a formal dissolution process overseen by a liquidator:
  Sometimes partners may disagree strongly and cannot continue working together. In such cases, winding up helps to close the LLP officially with the help of a liquidator, who manages the closing process fairly.

Key Steps in Voluntary Winding Up

If an LLP has assets, liabilities, or ongoing disputes, it cannot be closed through strike-off. In such cases, it must be wound up under the LLP (Winding-up & Dissolution) Rules, 2012, supervised by the Tribunal (NCLT).

Step 1: Partners’ Resolution

At least 75% of the partners must approve a resolution to wind up the LLP. This resolution must be filed with the Registrar within 30 days in the prescribed form under the LLP (Winding-up & Dissolution) Rules, 2012 (⚠️ note: this is not the MCA e-Form 1 used for name reservation).

Step 2: Declaration of Solvency

The partners file a declaration stating that the LLP has no debts, or that it will be able to pay its debts in full within a specified period (typically not exceeding 1 year). This declaration is supported by a statement of assets and liabilities, verified by an independent auditor.

Step 3: Creditor Consent

If the LLP has creditors, at least two-thirds in value must consent to the winding-up. Without creditor approval, the Tribunal may refuse the petition.

Step 4: Appointment of a Liquidator

The partners (and creditors, if any) appoint a liquidator to take charge of the LLP’s books, assets, and liabilities. The liquidator’s role is to realise assets, pay off debts, and distribute any surplus among partners.

Step 5: Tribunal Supervision & Final Dissolution

The liquidator submits reports and accounts to the National Company Law Tribunal (NCLT). Once satisfied that the process is complete, the NCLT passes an order for dissolution, and the LLP is struck off the register.

Expert Tip:
"Voluntary winding up is a more detailed and lengthy process compared to other closure methods. It is a good idea to seek advice from a legal professional who understands the NCLT procedures well, to make sure everything is done correctly and smoothly."

This process ensures that an LLP with assets and debts can close properly, legally settling all accounts and avoiding future problems for the partners.

LLP Closure: Costs and Timeline

Closing an LLP through Form 24 is a cost-effective process, but it requires certain statutory filings and usually takes a few months to complete depending on documentation and approval from the Registrar of Companies.

Estimated Costs for Closing an LLP

1. Government Fees:

When you file Form 24 to officially close your LLP by striking it off, you need to pay a government fee. Currently, this fee is around ₹500, but it can change, so always check the latest fee before applying.

2. Professional Fees:

You might need help from experts like Chartered Accountants (CAs), Company Secretaries (CS), or lawyers. They assist in preparing and reviewing your paperwork, making sure everything is correct, and submitting the forms. Their charges depend on how complicated your LLP’s case is, but usually, this can range from a few thousand to several thousand rupees.

3. Other Expenses:

You may also have small additional costs, such as notarizing affidavits and indemnity bonds, which confirm that your LLP owes nothing. Some documents may require stamp duty as well. These are usually minor fees but should be included in your budget.

Expected Time Taken to Close an LLP

Striking Off the LLP- If you choose to close your LLP by striking it off (which is quicker and easier), it generally takes about 3 to 6 months. The exact time depends on how busy the Registrar of Companies (RoC) is and whether your documents are complete and in order.

Winding Up the LLP- For LLPs that have assets, debts, or are still active, winding up is a longer and more complex procedure. This can take anywhere from 6 months to more than a year because the process involves appointing a liquidator, settling debts, selling assets, and getting approvals from the National Company Law Tribunal (NCLT).

Common Mistakes to Avoid During LLP Closure

• Failing to File Overdue Annual Returns Before Applying for Closure
  One common error is trying to close the LLP without completing all the required filings for previous years. If the LLP has any pending annual returns or financial statements that haven’t been submitted on time, the closure application may be delayed or rejected. It’s important to first clear all these pending returns to avoid trouble.
• Not Closing All Bank Accounts or Surrendering Registrations Like GST and TAN
  Before closing the LLP, all bank accounts opened in the LLP’s name must be properly closed. Also, any government registrations such as GST (Goods and Services Tax) or TAN (Tax Deduction and Collection Account Number) should be formally surrendered or cancelled. Ignoring this can cause ongoing liabilities or compliance problems even after the LLP is closed.
• Incorrectly Prepared Statement of Accounts Showing Remaining Assets or Liabilities
  The Statement of Accounts is a key document that must show the LLP has no assets or debts left. Sometimes this is prepared inaccurately, showing that money or liabilities still exist. This leads to delays or refusal of closure since the authorities expect a clean slate, with no financial loose ends.
• Incomplete or Improperly Executed Affidavits and Indemnity Bonds
  The closure process needs legal affidavits and indemnity bonds signed by all designated partners. These declare that the LLP has no pending dues and that partners will handle any future claims. If these documents are missing signatures, not notarized, or contain errors, the application becomes invalid or gets delayed.
• Not Obtaining Consent from All Partners
  Closing an LLP requires unanimous agreement from all its partners. Missing partner approvals or lacking proper written consent (such as a resolution) can stop the closure process in its tracks. The authorities need clear proof that everyone involved agrees with shutting down the LLP.

Avoiding these mistakes can make your LLP closure smooth, timely, and free from legal complications.

Conclusion

Closing your LLP properly means more than just stopping business; it involves completing legal formalities to ensure that all financial matters and government compliances are settled. Broadly, there are two ways to close an LLP. The first is Strike Off, a simple method suitable when the LLP has no debts and has been inactive for some time. The second is Voluntary Winding Up, a more detailed process required if the LLP still has assets, liabilities, or disputes. Following the prescribed rules and submitting accurate documents is essential to avoid penalties or complications later. To make the closure process hassle-free and legally secure, it is advisable to seek assistance from an experienced lawyer. You can connect with professionals on trusted platforms like Rest The Case, and also refer to official government websites for updated rules and forms.

Need professional help shutting down your LLP? Our Close the LLP package covers everything:

• Eligibility check and document review
• Drafting and filing of Form 24 on MCA
• Assistance with DSC & DIN
• Preparation of affidavits, indemnities, and compliance filings
• Advisory support until final dissolution is approved

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