STRIKING OFF (CLOSING DOWN) AN LLP: AN OPPORTUNITY NY THE MCA FOR DEFAULTING COMPANIES by CS MOHIT SALUJA
STRIKING OFF (CLOSING DOWN) AN LLP: AN OPPORTUNITY NY THE MCA FOR DEFAULTING COMPANIES
The penalty for LLPs defaulting in filing of any statutory return is Rs.100 per day,
without any maximum limit. Hence, its is often best to windup dormant LLPs so
that there is no requirement to file LLP Form 11, LLP Form 8 and Income Tax
Return for the LLP each financial year to maintain compliance and avoid penalty.
Hence, its best for Entrepreneurs having dormant or defaulting LLPs that are
accruing penalty to use this opportunity to close the LLP.
Earlier, the LLPs were to file all their overdue returns i.e. Form 8 and 11 with
concerned Registrar along with payment of additional Fees of Rs. 100 per day
which used to be about Lakhs of Rupess. But, Ministry of Corporate Affairs vide
Notification No. G.S.R. 470 (E) dated 16.05.2017 gave relaxation to the LLP that
those LLPs which have neither carried of their business not filed any return with
concerned Registrar and want to struck off their LLPs, will have to file the overdue
returns of the years in which the LLPs have actually worked i.e. before the date of
closure of their business i.e. the LLPs need not to file any returns for the period in
which the business was actually not carrying on, however a declaration shall be
given by the Designated partners w.r.t. date of closure of their business
Any LLP can close down its business by adopting any of the following two ways:
A) Declaring the LLP as Defunct
B) Winding up of LLP
HERE WE WILL DISCUSS ABOUT PROCEDURE OF CLOSING DOWN OF LLP BY DECLARING IT AS DEFUNCT
In case the LLP wants to close down its business or where it is not carrying on any
business operations for the period of one year or more, it can make an application
to the Registrar for declaring the LLP as defunct and removing the name of the
LLP from its register of LLP’s.
eForm 24 is required to be filed for striking off the name of LLP under clause (b)
of sub rule 1 of Rule 37 of LLP Rules 2008. Similarly, Registrar also has the power to strike off any defunct LLP after satisfying himself of the need to strike
off and has reasonable cause. However, in this case, registrar has to send a notice
to the LLP of his intention and request to send their representation within one
month from the date of the notice. The Registrar shall publish such notice or
content of the application made by the LLP on its website for a period of one
month for the information of the general public. In case no reply is received within
the mentioned period, registrar may strike off the name of LLP.
The following procedure can be followed for closing a LLP by filing Form 24:
1. LLP Form 24 can be filed only by LLPs that never commenced business or have
ceased commercial activity. Hence, if the LLP is operational and the promoters
wish to close the LLP, the LLP must first cease all commercial activity.
2. LLP Form 24 can be filed only by those LLP that have no creditors and no bank
account AS ON date of closure of LLP with registrar. Hence, prior to filing LLP
Form 24, any bank account opened in the name of the LLP must be closed and a
letter evidencing closure of the bank account in the name of the LLP must be
obtained from the Bank.
3. All the Designated Partners of the LLP must first execute an affidavit, either
jointly or severally, that the Limited Liability Partnership ceased to carry on
commercial activity from (Date) or has not commenced business.
Further, the LLP Partners must also declare that the LLP has no liabilities and
indemnify any liability that may arise even after striking off its name from the
Register. The liability of the Partners would not be extinguished even after closure
of a LLP while using Form LLP 24.
4. Along with Form LLP 24 the income tax return of the LLP must be enclosed.
Else, a copy of the acknowledgement of the latest Income-tax return filed must be
attached with the application for closing the LLP.
5. After incorporation of a LLP, the LLP agreement must be filed with the MCA
within 30 days of registration. In case this compliance was missed and LLP
agreement was not filed, then the initial LLP agreement, if entered into and not
filed, along with any amendments must be filed with late fees of Rs. 100 per day.
6. Once all the documents for filing of LLP Form 24 is prepared, a statement of
accounts disclosing NIL assets and NIL liabilities, that is certified by a practicing
Chartered Accountant up to a date not earlier than thirty days of the date of filing
of Form 24 must be obtained.
7. The above mentioned documents along with LLP Form 24 can be then filed with
the MCA to strike off name of LLP. On processing the application, if found
acceptable, the concerned Registrar of Companies would cause a notice to be
published on the MCA website announcing the striking off of the LLP.
NOTE TO NOTE: Ministry of Corporate Affairs vide Notification No. G.S.R. 470
(E) dated 16.05.2017 gave relaxation to the LLP that those LLPs which have
neither carried of their business not filed any return with concerned Registrar and
want to struck off their LLPs, will have to file the overdue returns of the years in
which the LLPs have actually worked i.e. before the date of closure of their
business i.e. the LLPs need not to file any returns for the period in which the
business was actually not carrying on, however a declaration shall be given by the
Designated partners w.r.t. date of closure of their business
Conclusion:
Its best for Entrepreneurs having dormant or defaulting LLPs, which
are actually not working and upon which there is accruing penalty, to get their
LLPs struck off by using the above procedure and get relief from heavy penalties
of the Ministry.
