Winding up an LLP (Limited Liability Partnership) in India involves a formal process to terminate its operations, dispose of assets, and settle liabilities, leading to its dissolution as a legal entity. The winding-up process for an LLP is primarily governed by the Limited Liability Partnership Act, 2008 and the Limited Liability Partnership Rules, 2009, as well as relevant provisions of the Insolvency and Bankruptcy Code, 2016 (IBC) for cases involving insolvency.

There are broadly two modes of winding up an LLP:

1. Voluntary Winding Up: Initiated by the partners themselves.

2. Winding Up by Tribunal (NCLT): Ordered by the National Company Law Tribunal.

3. Strike Off by Registrar (Form 24): A simplified process for defunct LLPs.

Let's delve into each process:

I. Voluntary Winding Up of an LLP

This process is initiated by the partners of the LLP when they decide to cease operations and dissolve the LLP without external pressure. It can be initiated even if the LLP has creditors, provided it can pay its debts in full.

A. Voluntary Winding Up (Solvent LLP - No Debts / Can pay debts in full)

This process is generally governed by Section 59 of the Insolvency and Bankruptcy Code, 2016, read with the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017.

Key Steps:

1. Declaration of Solvency by Designated Partners:

   • A majority of the Designated Partners must make a declaration in writing (accompanied by an affidavit) that:

     • They have made a full inquiry into the affairs of the LLP.

     • They are of the opinion that the LLP has no debts, or that it will be able to pay its debts in full from the proceeds of assets to be sold in the voluntary liquidation.

     • The LLP is not being wound up to defraud any person.

   • This declaration must be made within four weeks preceding the date of the resolution for voluntary winding up.

   • It must be accompanied by:

     • A statement of assets and liabilities of the LLP, as on the latest practicable date immediately before making the declaration.

     • A copy of the auditor's report on the accounts of the LLP for the period since the date of the last financial statement up to the date of the declaration (if applicable).

     • A valuation report, if any assets are subject to valuation.

2. Partners' Resolution:

   • Within four weeks of the declaration of solvency, the partners must pass a Special Resolution (approval of at least three-fourths of the total number of partners) for voluntary winding up.

   • The resolution must also approve the appointment of an Insolvency Professional as the Liquidator and fix their remuneration.

3. Creditors' Approval (If Debts Exist):

   • If the LLP has debts, the resolution for voluntary winding up (and the appointment of the liquidator) must also be approved by creditors representing two-thirds in value of the total debt of the LLP within seven days of the partners' resolution. If creditors do not approve, the LLP cannot proceed with voluntary winding up under this section.

4. Filing of Resolutions with RoC:

   • File the resolution for voluntary winding up with the Registrar of Companies (RoC) in Form 2 within 30 days of passing the resolution.

   • File the declaration of solvency and other accompanying documents with the RoC within 15 days of the resolution.

5. Public Announcement by Liquidator:

   • The appointed Liquidator must make a public announcement of the liquidation process in two newspapers (one English and one vernacular, widely circulated in the district of the LLP's registered office) and on the website of the Insolvency and Bankruptcy Board of India (IBBI) within 5 days of their appointment. This invites claims from creditors.

6. Verification of Claims:

   • The Liquidator receives and verifies claims from creditors, partners, and other stakeholders within a specified period (e.g., 30 days from public announcement).

7. Realization of Assets & Settlement of Liabilities:

   • The Liquidator takes control of the LLP's assets, realizes them (sells them), and settles all debts and liabilities in the order of priority prescribed by law.

   • A bank account in the name of the LLP "in voluntary liquidation" is opened to manage funds.

8. Distribution of Proceeds:

   • After paying off all debts and liquidation costs, any remaining surplus is distributed among the partners according to their rights in the LLP Agreement.

9. Liquidator's Final Report:

   • Once the affairs of the LLP are completely wound up, the Liquidator prepares a final report detailing how the winding up has been conducted, how the property has been disposed of, and a statement of accounts for the liquidation. This report is presented to the partners.

10. Application for Dissolution to NCLT:

    • The Liquidator applies to the National Company Law Tribunal (NCLT) for the dissolution of the LLP, submitting the final report and audited accounts.

11. NCLT Order for Dissolution:

    • If the NCLT is satisfied that the winding-up process has been conducted in accordance with the law, it passes an order for the dissolution of the LLP.

12. Filing of Order with RoC:

    • The Liquidator files a copy of the NCLT's dissolution order with the RoC in Form 9 (LLP Liquidator's final winding up account) or other relevant forms.

    • The RoC then publishes a notice in the Official Gazette, stating that the LLP is dissolved, and its name is removed from the Register.

II. Winding Up by Tribunal (NCLT)

The National Company Law Tribunal (NCLT) can order the winding up of an LLP under Section 64 of the LLP Act, 2008, in the following circumstances:

• Decision by LLP: If the LLP itself decides to be wound up by the Tribunal.

• Reduced Partners: If, for a period of more than six months, the number of partners of the LLP is reduced below two.

• Inability to Pay Debts: If the LLP is unable to pay its debts (insolvent).

• Against National Interest: If the LLP has acted against the interests of the sovereignty and integrity of India, the security of the State, or public order.

• Default in Filings: If the LLP has made a default in filing with the Registrar the Statement of Account and Solvency or annual return for any five consecutive financial years.

• Just and Equitable: If the Tribunal is of the opinion that it is just and equitable that the LLP should be wound up.

Key Steps:

1. Petition for Winding Up:

   • A petition for winding up can be filed with the NCLT by the LLP itself, any partner(s), any creditor(s), the Registrar, or a person authorized by the Central Government.

2. Tribunal's Decision & Winding-Up Order:

   • The NCLT hears the petition. If it finds sufficient grounds, it passes a winding-up order.

3. Appointment of Provisional Liquidator/Liquidator:

   • Upon passing the winding-up order, the Tribunal appoints an Official Liquidator (or Provisional Liquidator) to oversee the winding-up process.

4. Public Announcement:

   • The Liquidator makes a public announcement and calls for claims from creditors and other stakeholders.

5. Taking Custody of Assets:

   • The Liquidator takes control of all assets, books, and records of the LLP.

6. Investigation & Realization of Assets:

   • The Liquidator investigates the affairs of the LLP, realizes its assets, and collects any outstanding dues.

7. Settlement of Claims & Distribution:

   • The Liquidator scrutinizes claims, settles the debts of the LLP, and distributes any remaining proceeds according to the prescribed order of priority.

8. Final Report to Tribunal:

   • Once the liquidation is complete, the Liquidator submits a final report to the NCLT.

9. Dissolution Order:

   • If satisfied, the NCLT passes a final order dissolving the LLP.

10. Filing with RoC:

    • A copy of the NCLT's dissolution order is filed with the RoC. The RoC then removes the LLP's name from the register.

Role of Liquidator: Whether voluntary or by Tribunal, the Liquidator's role is crucial. They are responsible for:

• Taking custody of all assets and records of the LLP.

• Realizing (selling) the assets of the LLP.

• Inviting, verifying, and settling claims from creditors.

• Distributing any surplus to partners.

• Maintaining proper accounts of the liquidation process.

• Filing periodic and final reports with the relevant authorities (IBBI, NCLT, RoC).

• Ensuring compliance with all legal provisions during the winding-up.

Role of Tribunal (NCLT): The NCLT plays an oversight and adjudicatory role. It:

• Hears petitions for winding up.

• Passes winding-up orders.

• Appoints/supervises liquidators.

• Adjudicates disputes during the winding up.

• Passes the final dissolution order.

III. Strike Off of LLP (Fast Track Exit / Defunct LLP)

This is a simpler and faster process for LLPs that are defunct or not carrying on any business activity. It's governed by Rule 37 of the Limited Liability Partnership Rules, 2009.

Eligibility Criteria:

• The LLP has not commenced business since its incorporation OR has ceased to carry on business operations for a period of one year or more.

• The LLP has no assets and no liabilities as of the date of application.

• No prosecution is pending against the LLP.

• The LLP has filed all its due returns (Form 8 & Form 11) up to the end of the financial year in which it ceased business operations.

Key Steps:

1. Cessation of Business Operations & Closing Bank Accounts:

   • Ensure the LLP has completely ceased all business activities.

   • Close all bank accounts opened in the name of the LLP and obtain a bank closure letter.

2. Settle All Liabilities:

   • Ensure there are absolutely no outstanding debts or liabilities (including statutory dues, loans, etc.).

3. File Overdue Returns (if any):

   • File all pending Form 8 (Statement of Accounts and Solvency) and Form 11 (Annual Return) up to the financial year in which the LLP ceased its operations. Note that if the LLP never commenced business, this step might be simpler.

4. Partners' Consent & Affidavits:

   • Obtain written consent from all partners for the strike-off.

   • All Designated Partners (DPs) must individually sign affidavits stating that:

     • The LLP has not commenced business or has ceased business from a specific date.

     • The LLP has no assets and no liabilities.

     • They undertake to indemnify any person for any losses, claims, or liabilities that may arise after the striking off of the LLP's name.

5. Indemnity Bond:

   • An Indemnity Bond must be executed by all Designated Partners, jointly and severally, indemnifying the Registrar against any losses, claims, or liabilities after the LLP's name is struck off.

6. Statement of Accounts (Certified by CA):

   • Prepare a Statement of Accounts of the LLP showing NIL assets and NIL liabilities. This statement must be certified by a practicing Chartered Accountant and should not be older than 30 days from the date of filing the application.

7. Latest Income Tax Return (ITR) Acknowledgment:

   • Attach a copy of the acknowledgment of the latest Income Tax Return filed by the LLP (if applicable).

8. File Form LLP-24:

   • File Form LLP-24 (Application for striking off name of LLP from the Register) with the RoC.

   • Attachments:

     • Consent of all partners.

     • Affidavits from all Designated Partners.

     • Indemnity Bond.

     • CA-certified Statement of Accounts (NIL assets and liabilities).

     • Copy of the latest ITR acknowledgment (if filed).

     • Copy of the initial LLP Agreement and any amendments (if not filed earlier).

     • Bank account closure letter(s).

9. ROC Processing & Notice:

   • The RoC reviews the application. If satisfied, it will publish a notice on the MCA website (or in the Official Gazette) for a period of 30 days, inviting objections from the public.

10. Final Strike-Off:

    • If no objections are received within the stipulated time, or if the objections are found to be baseless, the Registrar strikes the name of the LLP off the Register and publishes a notice in the Official Gazette. The LLP ceases to exist from the date of this notice.

Key Forms for LLP Winding Up (Commonly Used)

• Form 2: For filing resolution for voluntary winding up and declaration of solvency.

• Form LLP-24: Application for striking off the name of the LLP from the Register (for defunct LLPs).

• Form 9: LLP Liquidator's final winding-up account (in voluntary winding up, filed with NCLT dissolution order).

• Form 8 (Statement of Account & Solvency) & Form 11 (Annual Return): These must be up-to-date before initiating strike-off.