STRIKE-OFF PROCEDURE FOR A LIMITED LIABILITY PARTNERSHIP (LLP) UNDER THE LLP ACT, 2008

1. Introduction

A Limited Liability Partnership (LLP) that ceases its business operations for a specified period is required to apply for strike-off under the LLP Act, 2008. The strike-off procedure ensures that the LLP is legally dissolved, avoiding any future legal or financial liabilities.

2. Eligibility for Strike-Off

An LLP may apply for strike-off under the following circumstances:

• The LLP was formed for commercial activities or providing services but has ceased operations for a period of one year or more.

• The LLP has not conducted any business since incorporation or from the end of the last financial year.

• If an LLP remains non-functional for two or more years, the Registrar of Companies (ROC) has the power to strike off the LLP suo moto under Section 63 of the LLP Act, 2008 and Rule 37 of the Striking off Name of Defunct LLP Rules.

• LLPs regulated under a special law must obtain approval from the respective regulatory body before filing for strike-off.

3. Consequences of Not Applying for Strike-Off

• A dormant or non-functioning LLP that fails to comply with legal provisions may face penalties, fines, and legal action.

• Partners of such an LLP may be debarred from forming another LLP in the future.

• Continuing liabilities and non-compliance may result in regulatory scrutiny.

4. Definition of Cessation of Business

The date of cessation is determined as the date when the LLP stopped generating revenue. Any transactions post-cessation, such as receipt of payments from debtors or payments to creditors, do not qualify as revenue-generating business activities.

5. Pre-Conditions for Filing Form 24

Before filing an application for strike-off using Form 24, the LLP must satisfy the following conditions:

5.1. Approval for Strike-Off

• A meeting of partners must be held to obtain approval for making the application.

• A resolution must be passed, and a certified true copy (CTC) of the resolution must be maintained.

5.2. Consent of Partners

• Written consent of all partners must be obtained before filing Form 24.

5.3. Closure of Bank Accounts

• All bank accounts of the LLP must be closed, and a closure certificate or acknowledgment must be obtained from the bank.

5.4. No Liabilities

• The LLP must have no outstanding liabilities on the date of filing Form 24.

5.5. Filing of Overdue Returns

• The LLP must have filed all pending annual returns (Form 8 and Form 11) before filing Form 24.

5.6. Income Tax Returns (ITR)

• The LLP must have filed its income tax returns up to the date of application.

5.7. Availability of Initial LLP Agreement

• The initial LLP agreement must be available, even if it was not filed with Form 3.

6. Documents Required for Filing Form 24

The following documents must be submitted along with Form 24:

1. Authority Letter – Signed by all partners, authorizing the application for strike-off.

2. Acknowledgment of Latest Income Tax Return – A self-explanatory document proving tax compliance.

3. Detailed Application – A document specifying the full details of the LLP and the reasons for closure.

4. Statement of Accounts – A financial statement disclosing NIL assets and NIL liabilities, certified by a Chartered Accountant (CA), not older than 30 days from the date of filing.

5. Initial LLP Agreement – If entered into but not filed earlier, along with any amendments.

6. Affidavit – Signed by designated partners, either jointly or severally, affirming the accuracy of the application.

7. Indemnity Bond – To safeguard against any liabilities arising post-dissolution.

8. Consent of Partners and Creditors – Written approvals from all partners and creditors, if any.

9. Form 8 and Form 11 Filing Proof – Copies of the annual return filings along with the payment receipts.

10. Bank Account Closure Certificate – Issued by the bank, confirming account closure.

11. Certified True Copy (CTC) of Resolution – Passed at the partners’ meeting approving the strike-off application.

7. Filing Procedure

• Prepare all necessary documents and ensure compliance with pre-conditions.

• File Form 24 with the concerned ROC along with the required documents.

• The Registrar will issue a notice to the LLP and its partners, seeking representations within one month.

• If no objections are received, the ROC will strike off the LLP from the Register of LLPs.

8. Conclusion

Dissolving a non-functional LLP through the proper strike-off procedure helps in avoiding penalties, liabilities, and legal complications. It is advisable for partners of defunct LLPs to follow the correct process to ensure a smooth closure of operations.

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Article Compiled by:-

~Neel Lakhtariya

(LegalMantra.net Team)

Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including Newspapers, Journals, Bare Acts, Case Materials , Charted Secretary, Research Papers etc.