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🧾 Winding Up of LLP in India – A Complete Guide
Winding up a Limited Liability Partnership (LLP) means legally dissolving the firm by settling its debts, liquidating its assets, and distributing the remaining funds among partners. This process can be done voluntarily or through Tribunal intervention, depending on the circumstances like insolvency, inactivity, or legal breaches.
🔍 Navigating this complex process demands strict legal compliance and proper financial management. India Fills provides expert guidance for a hassle-free and legally sound winding-up procedure.
📌 What is Winding Up of LLP?
Winding up of an LLP is the formal process of shutting down an LLP’s business, selling off its assets, clearing liabilities, and distributing leftover funds to partners. Once winding up is complete, the LLP is dissolved as a legal entity and removed from the government records.
📚 Legal Framework for LLP Winding Up
The winding up and dissolution of LLPs in India is governed by:
- Section 65 of LLP Act, 2008 – Empowers the Central Government to create rules for LLP winding up.
- Section 67 of LLP Act, 2008 – Allows provisions of the Companies Act, 1956 to apply to LLPs.
- Notification GSR 6(E), dated 6 January 2010 – Specifies Companies Act provisions applicable to LLPs.
- LLP (Winding Up and Dissolution) Rules, 2012 – Details the procedures, forms, and fees related to LLP winding up.
🔄 Winding Up vs. Dissolution – Key Difference
Basis | Winding Up | Dissolution |
Meaning | Process of settling affairs, paying debts, and liquidating assets | Final stage where LLP ceases to exist legally |
Legal Status | LLP remains a legal entity during the process | LLP is legally removed from records post-dissolution |
👉 Winding up is the process, dissolution is the outcome.
⚙️ Modes of LLP Winding Up
LLP can be wound up in the following ways:
✅ Voluntary Winding Up
Partners may decide to shut down the LLP through mutual agreement or as specified in the LLP agreement.
⚖️ Winding Up by Tribunal
A Tribunal may order winding up for:
- Insolvency
- Non-compliance
- Illegal activities
- Lack of partners
- Statutory defaults
🏛️ Voluntary Liquidation under IBC, 2016
If the LLP is solvent and chooses to close voluntarily, it can opt for liquidation under the Insolvency and Bankruptcy Code (IBC), 2016.
📋 Pre-Requisites for Voluntary Liquidation
- Solvency – LLP must be able to repay all debts.
- Declaration by Partners – Majority of designated partners must declare the LLP’s ability to repay debts.
- No Fraudulent Intent – Winding up must be in good faith.
🧾 Procedure for Voluntary Liquidation of LLP
1️⃣ Declaration of Solvency (DOS)
A verified declaration with:
- Audited financial statements (last 2 years)
- Valuation report by a registered valuer
2️⃣ Passing a Resolution
- Resolution for liquidation
- Appointment of an Insolvency Professional as Liquidator
3️⃣ Creditor Approval (if applicable)
Approval from creditors holding at least 2/3 of total debt.
4️⃣ Notification
Inform the Registrar and IBBI within 7 days of resolution.
5️⃣ Public Announcement
The Liquidator must invite claims from stakeholders via public notice.
6️⃣ Verification of Claims
Claims are verified within 30 days of receipt.
7️⃣ Realisation & Distribution of Assets
Assets are valued, sold, and proceeds are distributed (after deducting liquidation costs).
8️⃣ Final Dissolution
After asset distribution, the Liquidator files an application with the Tribunal or Registrar for dissolution.
🏛️ Winding Up of LLP by Tribunal
A Tribunal can order winding up if:
- LLP has <2 partners for 6+ months
- LLP is unable to pay debts
- LLP acts against public/national interest
- LLP defaults statutory filings for 5 years
- It’s just and equitable to wind up
🧾 Procedure for Tribunal-led Winding Up
- Petition Filing – By LLP, partners, creditors, or Registrar.
- Tribunal Order – Tribunal evaluates and may approve the winding-up.
- Appointment of Liquidator – To oversee asset disposal and debt settlement.
- Public Notice – Invite claims from stakeholders.
- Claim Settlement – Validate and pay creditor dues.
- Asset Liquidation – Sell assets to generate repayment funds.
- Distribution of Surplus – Any remaining assets go to partners.
- Dissolution Application – Filed by Liquidator to Tribunal.
- Registrar Filing – Order of dissolution is submitted to the Registrar.
🧯 Insolvency Proceedings for LLP under IBC, 2016
In case of insolvency, LLP can be wound up through IBC as follows:
🔹 Initiation
Filed by LLP, creditors, or partners to NCLT.
⏸️ Moratorium
All legal actions against LLP are temporarily halted.
🧑⚖️ Appointment of IRP
An Insolvency Resolution Professional takes over management.
💬 Formation of CoC
A Committee of Creditors (CoC) reviews and approves the resolution plan.
📄 Resolution Plan
Plan for asset restructure, debt repayment, or asset sale.
🚫 Liquidation
If plan isn’t approved in 180–270 days, liquidation proceeds.
✅ Final Dissolution
After liquidation, LLP is dissolved.
🤝 India Fills – Your Partner in LLP Winding Up
At India Fills, we offer complete assistance in the LLP winding-up process, including:
✅ Drafting declarations and resolutions
✅ Appointing and coordinating with the Liquidator
✅ Filing with Registrar & IBBI
✅ Managing public notices and claim verification
✅ Ensuring full legal compliance
Contact us today to close your LLP seamlessly and lawfully with expert guidance every step of the way.
