A business may be required to be closed due to various reasons, like non-operation, closure of business, recurring losses, the passing of the key managerial person, the dispute among promoters, un-ability to pay debts of the LLP, etc. Closing or winding up of an LLP is a challenging task, where the designated partners and all partners must first decide on the best method available under the LLP Act, 2008 to wind up the LLP.
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Closure of Private Limited Company
Winding up or closing a limited liability partnership (LLP) company in India is to be made strictly as per the provisions given in the Sections 63-65 of the Indian LLP Act of 2008. Again, this winding up of an LLP may be voluntarily or compulsorily (by a Tribunal or Court).
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Absence of the minimum number of prescribed partners (which is Two) for over Six months.
The LLP is unable to pay off its debts, or is at the brink of getting bankrupt.
Failure of the LLP in filing the Statement of Accounts and Solvency or the Annual Returns with the Registrar for any Five consecutive Financial Years.
The LLP being against the integrity and sovereignty of India, or the security of State or Public Order.
Rigorous order of a tribunal that the LLP must be wound up based on the specified just and equitable reasons.
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procedure to close an LLP company in India, involves the following processes or steps:
The LLP must pass a resolution in favor of its winding up with approval of at least 3/4th of its total number of partners. This resolution should also be supported by at least 2/3rd of its creditors in value.
Within 15 days of passing such a resolution a declaration in an affidavit duly signed by the majority of the designated partners of the LLP, should be submitted to the Registrar. This declaration must clarify that the LLP has no debts, or if there are some debts, the LLP is able to pay off those in full through sale of its assets, in a maximum of one year period, counted from the date of the commencement of winding up. A copy of the resolution for winding up is to be submitted to the Registrar within 30 Days of passing the same.
Within Two Weeks of the receipt of the consent of sufficient creditors in favor of the resolution of winding up, the LLP is required to advertise its notice of resolution in a newspaper which is widely read in the region where the registered office of the LLP is located.
Within 30 days of receiving creditors’ consent, the designated partners are then required to appoint a Liquidator to carry out the necessary processes of winding up, along with maintaining proper books of accounts. Then, the Liquidator is required to submit the report together with the resolution to the Registrar, and file an application for winding up to the Tribunal. Submission of other documents mentioned above, is also to be made.
In case the Tribunal gets satisfied with the processing of winding up and necessary accounts, then it will pass the permission for dissolution of the LLP. Then, the liquidator needs to file the order of Tribunal with the Registrar along with an application requesting winding up. Finally, the Registrar will publish a notice in the Official Gazette regarding the dissolution of the said LLP.
For small businesses, what are the benefits of Private limited company ?
It provides creditability to business in the eyes of financial institutions, suppliers and potential clients. As it makes easier for companies to get loans at favorable terms from banks or convincing potential clients while entering into deals.
Is there any qualification to become a director or shareholder in a Private Limited Company ?
Any individual can become a shareholder in a private limited company. For becoming a director in a company, no professional or educational qualification is required.
What address to be given as registered office of the company ?
A registered office is required to hold Annual general meetings, for keeping records and receiving correspondence from all the statutory/government authorities. The registered office does not have to be necessarily owned by the company, it can be on rented premises also. The registered office of the company determines its jurisdiction for registration, for instance, a company with registered office in Delhi will come under the jurisdiction of Registrar of Companies, Delhi.
Is it allowed to change registered office of the company after registration ?
Yes, A company can change its registered office any time after following specified procedure. The changed address can be situated within the same state or in a different state from the state in which it was originally registered.
I am carrying business as a sole proprietor/partnership, can I register a private limited company ?
Yes, A private limited company can be set up following provisions of Companies Act, 1956
Is Private Limited Company structure suitable for my business ?
As said before, the biggest advantage of starting a business with private limited company form of organization is the outlook by all outside parties towards the business. A private limited company is perceived to be more trustworthy compared to other business structures. Though the decision of whether to set up the business as a private limited company or not, rests upon you, but it is advised that the entrepreneur closely evaluate all the merits and demerits . In businesses which are in expansion mode or trustworthiness is an important part of business transactions, Private limited company form of structure can prove to be a good option.