LLP Closure and Company Closure in India: A Guide by Compliance Calendar LLP
LLP Closure and Company Closure in India: A Guide by Compliance Calendar LLP
Blog Article
In India, closing a business, whether it is a Limited Liability Partnership (LLP) or a company, involves legal procedures and compliance requirements. The process must adhere to the respective laws and regulations to avoid future liabilities. This article outlines the procedures, legal requirements, and best practices for LLP and company closure with insights from Compliance Calendar LLP, a leading compliance service provider.
LLP Closure in India
An LLP is governed by the Limited Liability Partnership Act, 2008. Closing an LLP can be voluntary or due to regulatory intervention.
- Reasons for LLP Closure
- Voluntary Closure: Partners decide to wind up due to business cessation or no future prospects.
- Compulsory Closure: Ordered by the Tribunal for insolvency, fraud, or non-compliance.
Methods of LLP Closure
- Voluntary Winding Up:
- Eligibility: LLP should have no liabilities and no pending assets.
Procedure:
- Hold a meeting of all partners to pass a resolution for closure.
- File the resolution with the Registrar of Companies (RoC) using Form 1.
- Obtain a declaration of solvency from all partners
- File Form 24 along with required documents, including:
- Consent from creditors, if applicable.
- Affidavit declaring the LLP has no liabilities.
- Statement of account not older than 30 days.
- RoC reviews the application and issues a closure confirmation.
- Compulsory Winding Up:
- Ordered by the National Company Law Tribunal (NCLT).
- May occur due to the inability to pay debts, fraud, or violation of the LLP Act.
- Key Documents for LLP Closure
- LLP Agreement
- Partner resolutions
- Statement of accounts
- Affidavits and indemnity bonds
- Tax clearance certificate
- Role of Compliance Calendar LLP
Compliance Calendar LLP assists in:
- Preparing and filing necessary forms.
- Drafting affidavits and indemnity bonds.
- Coordinating with RoC for a seamless closure process.
Company Closure in India
Companies in India are governed by the Companies Act, 2013. Closing a company can be a complex process requiring adherence to legal and compliance frameworks.
- Types of Company Closure
- Initiated by shareholders or members when the company is no longer operational.Voluntary Closure:
Compulsory Closure:
- Ordered by NCLT due to insolvency, fraud, or other legal violations.
- Methods of Company Closure
- Fast-Track Exit (FTE) under Section 248:
- Suitable for defunct companies or companies with no liabilities.
- Procedure:
- Convene a board meeting and pass a resolution.
File an application for removal of name (Form STK-2).
Submit documents such as:
- Statement of accounts.
- Shareholder resolution.
- Affidavit and indemnity bond from directors.
- RoC examines the application and publishes a public notice.
- Company is struck off the register.
- Voluntary Liquidation:
- Applicable when the company has liabilities but intends to close.
Procedure:
- Shareholders pass a special resolution for winding up
- Appointment of a liquidator to settle liabilities.
- Submission of final accounts and reports.
- NCLT approves the closure
- Compulsory Liquidation:
- Initiated by creditors or regulators.
- NCLT appoints a liquidator to manage the process.
- Key Documents for Company Closure
- Memorandum and Articles of Association
- Financial statements
- Board and shareholder resolutions
- Tax clearance certificate
- Affidavits and indemnity bonds
- Role of Compliance Calendar LLP
- Compliance Calendar LLP ensures:
- Preparation and filing of all legal documents.
- Liaison with NCLT and RoC.
- Expert guidance on tax and compliance clearance.
Comparison: LLP vs. Company Closure
| Criteria | LLP Closure | Company Closure |
|---|---|---|
| Governing Law | LLP Act, 2008 | Companies Act, 2013 |
| Primary Forms | Form 24 | Form STK-2, Forms for liquidation |
| Approval Authority | Registrar of Companies | RoC, NCLT |
| Time Required | 3-6 months | 6-12 months |
| Cost | Relatively lower | Higher due to complexity |
Compliance Requirements
- Both LLPs and companies must:
- Clear Outstanding Liabilities: Ensure no dues to creditors, employees, or government authorities.
- File Annual Returns: Complete pending filings before closure.
- Tax Compliance: Obtain a tax clearance certificate from the Income Tax Department
- Common Challenges
- Pending legal disputes or litigations.
- Non-compliance with annual filings.
- Lack of proper documentation
Why Choose Compliance Calendar LLP?
With years of experience in handling corporate compliance, Compliance Calendar LLP offers:
- End-to-end support for LLP closure and company closures.
- Expert advice on legal and tax matters.
- Timely updates and professional communication.
- Cost-effective solutions tailored to business needs.
Conclusion
Closing an LLP or a closure of company in India is a structured process requiring meticulous attention to legal and compliance obligations. By partnering with Compliance Calendar LLP, businesses can ensure a hassle-free closure, avoiding future liabilities or penalties. For more information or personalized assistance, contact Compliance Calendar LLP today and simplify your business closure journey.