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How to close an LLP  in India (Easy Exit / Strike off)

May 29, 2017     by Simratjeet Kaur

 

There can be many modes of closing an LLP. Strike off, Voluntary Liquidation or filing for bankruptcy are few options depending upon the facts. If the LLP is not doing any business or never did any business after incorporation, it is advisable to follow an easy process of strike off of the LLP. This option can be chosen if the LLP has no assets and no liabilities.

 

Strike off

Here, we are discussing the simplest mode, i.e. Strike off. In a bid to simplify the process for striking off the Limited Liability Partnerships (LLP), the Central Government has amended the LLP Rules, 2009 whereby it will become easy for the defunct LLPs to apply for strike off its name from the Register of Names. It is a long awaited amendment which was actively sought by the LLPs which had either ceased its business activities or prior to filing of LLP Agreement (in Form 3), the Partners of the LLP developed a discord between themselves (LLP agreement is entered between Partners after incorporation).

 

Filings for the prior period mandatory even if no business:

Striking off an LLP was not an easy option prior to this amendment, as earlier LLP Rules (Rule 37) mandated filing of all the overdue forms prior to proceeding for strike off. An LLP, even if not operational, is required to file a minimum of two forms annually, i.e. Annual Return (in e-form 11 by 31st May every year) and Statement of Accounts (in e-form 8 by 30th October every year). In case of delayed filing, there is levied additional fees which increases with each day of delay. There is no upper cap to such additional fees and therefore, it became a significant financial burden for those LLPs which had outstanding filings for years together. The problem multiplied in cases of those LLPs which never commenced any business and all the compliances were ignored, probably, out of discord among the partners. It may be noted that the provisions for strike off of Defunct companies existed as simple procedure where it was possible to close down a company which met certain conditions without having to provide for previous year filings. For details on striking off of Companies, please visit the link Strike Off Under Companies Act, 2013. Industry circles expected similar provisions in case of LLPs as well for past many years.

 

LLP Rules amended w.e.f 20th May, 2017:

W.e.f 20th May 2017, Rule 37 of the LLP Rules, 2009 was amended to bring in much needed relief to the stakeholders who, prior to this amendment, had no means to close a defunct LLP without incurring huge additional fees.

The major highlights of the amendment are as follows:

  • Filing of overdue Form 8 and 11: As per the notification, the LLPs now have to file overdue Statement of Accounts and Annual Return only till the end of financial year in which the LLPs have ceased to carry on its business or commercial operations and not thereafter.
  • Certain attachments have been prescribed to be filed with the form 24 (eForm 24 is required to be filed for striking off the name of LLP) which also underlines the eligibility criteria for strike off, are as follows:
    • Statement of Accounts disclosing nil assets and nil liabilities
      1. The statement is to certified by a CA in practise
      2. The statement should not be older than 30 days from the date of filing
    • Copy of acknowledgement of latest ITR (Income Tax Return) filed, in case LLP has carried out any business
    • Copy of initial LLP Agreement, if entered into and not filed, along with any changes made in it in cases where the LLP has not commenced business or commercial operations since its incorporation.

Detailed Notification can be found at Limited Liability Partnership (Amendment) Rules, 2017.

 

Conclusion:

The amendment in the Rules brings a major reprieve to the LLPs who have not filed Form 3 i.e. the LLP Agreement, as the LLPs can straight away go ahead with the filing of Form 24 for Strike off. Prior to the amendment, the LLPs had to comply with requisite compliance of filing of Form 3, 8 and 11 before filing of Form 24. Also, late filing of such forms incurs huge expenses due to levy of heavy additional fees. Now, the LLPs can easily go ahead with the strike off of its name without having to consider the burden of additional fees for late filing (for years where no business was done).

Now that the Central Government has addressed the issue of easy strike off of LLPs, let’s wait and watch when the second concern regarding the upper cap on additional fees is also addressed.

 

 

47 thoughts on “How to close an LLP  in India (Easy Exit / Strike off)

  1. Helo My Query is,
    while I was filing Form 24 for closure of LLP, while adding LLPIN in form 24 it is showing as defunct.
    Which form shall I fill in this case.

  2. Hi Simrat,
    I had opened an LLP with my partner on 5/1/2017. We had a falling out within days and now he is no longer reachable. Our company never did any business at all and we never filed any of the forms 3/8/11 or even the Nil ITR. I have the following queries:
    1. Since I cannot reach my ex-partner, can I get the company striked off with Form 24 on my own?
    2. Since we haven’t filed any of the 3/8/11 forms and neither any Nil ITR, would there be any charges/penalties that I will have to bear on my own while closing the company?
    3. Is statement of Account the same as the LLP’s current account statement?

    1. Hi,
      Please note our answers to your query:

      1. Strike off requires consent of all the partners and an affidavit and indemnity bond by all the designated partners.

      2. For making an application for strike off, the LLP shall file its overdue returns in Form 8 and 11 upto the end of the FY in which it has ceased to carry on its business prior to making application for strike off. In your case, since the LLP has never commenced its business since incorporation, it is not required to file LLP 8 or 11. Also since the LLP agreement has not been filed in Form LLP 3, it should be attached at the time of filing of Form LLP 24(for strike off). With respect to ITR, although the LLP has not commenced its business, it is required to file a NIL ITR..

      3. Statement of Accounts (SoA) is different from LLP’s current account statement. SoA consists of audited balance sheet and P/L account which is filed in Form 8.

    1. The DIN can be surrendered only in those cases which are mentioned under Rule 11 of The Companies (Appointment and Qualifications of Directors) Rules, 2014 (http://ebook.mca.gov.in/Childwindow1.aspx?pageid=18086&type=RU&ChildTitle=Chapter%20XI%20The%20Companies%20(Appointment%20and%20Qualification%20of%20Directors)%20Rules,%202014) such as death, adjudicated as insolvent, duplicate DIN, etc. The LLP in the process of strike-off is no reason for surrender of DIN.

  3. hello sir,
    we have started the LLP company but due to some reason we have not done any business from that LLP account. So do i need to file income tax return for that and if i am not doing any traction on that can I close that

    1. Pursuant to clause (b) of sub rule 1 of Rule 37 of LLP Rules 2008, if LLP is not carrying any business or operations for a period of one year or more, it can make an application to Registrar in e-form 24 for declaring the Company as defunct and removing the name of LLP from register of LLP’s. Further, a Nil return should also be filed even if your Company is not conducting any business.

  4. Sir I have incorporated a llp in 2016 bt after some only there is a dispute between partners that’s why no further compliances for the same has been done.

    Now we want to close the same without paying heavy additional fees. Could you please provide some help for the same

    1. LLP is not required to file annual returns and LLP agreement if it has not commenced business or commercial operations since Incorporation.

      However, if there was any business/commercial operation conducted since incorporation then it will be required to comply with all the filings (annual returns, agreements, etc.) with additional fee as may be applicable before going for strike off.

  5. Sir,
    I have submitted Form -24 to strike off a LLP in Nov 2017 now MCA informed that “status of form has been changed to Action initiated for strike off – Examination on account of action initiated under Rule 37(1) of the LLP Rules, 2009. You are advised to take necessary action with respect to the above at the earliest in order to get the form
    processed.”

    Now I don’t understand what I have to do to get this form process.

    1. Kindly specify with the facts of your query as whether you are refereeing to Rule 37(1)(a) or Rule 37(1)(b) of LLP Rules, 2009.Kindly seek clarification from Registrar of Office(ROC) or take professional advice on this matter.

  6. I and my 2 partners want to close LLP which was registered Aug 30, 2018. We just registered LLP Registration only and pan we did not do any business till date and did not open a current account also. now we want to close company.
    (A) Is current account is mandatory to complete process company registration
    (B) Any time period is there that we have to wait to close company

    1. As per Rule 37 of LLP Rules, 2009 if a company is not carrying on any business for a period of one year or more it can make an application to Registrar in Form 24 for striking off name of LLP from the register of LLP. In the above cited case LLP was incorporated on 30th August, 2018, one year has not been elapsed. Therefore in order to close the LLP you have to wait for completion of one year.
      Also, as per our understanding, Current account is not mandatory to complete LLP registration process. Bank account is opened after the incorporation of a LLP. Therefore, it is a post incorporation compliance.

  7. Hello sir,
    I and my 2 partners want to close LLP which was registered Aug 30, 2018.
    We just registered LLP Registration only and pan any business and we did not open a current account. now we want to close company the current account is mandatory to close company in Form -24 in Form -24 to Registrar for Closure of LLP is that any time period we have to wait to close company

    Sir please let me know the process to close this LLP

    1. As per Rule 37 of LLP Rules, 2009 if a company is not carrying on any business for a period of one year or more it can make an application to Registrar in Form 24 for striking off name of LLP from the register of LLP. In the above cited case LLP was incorporated on 30th August, 2018, one year has not been elapsed. Therefore in order to close the LLP you have to wait for completion of one year.
      Also, you need to give evidence of closure of bank account, if opened.

  8. My LLP was incorporated on 12th August, 2017 and so can I proceed for Filing Form 24 after 12th August, 2018, as the LLP has not commenced any business since incorporation.

    1. To file form 24 for strike off of LLP it must not be carrying any business or operation for a period of at least 1 year. Since your LLP was incorporated in Aug. 2017, and it has been a year of non- operation, you can proceed with filing of Form 24 for strike off. Attachments to be filed along with Form 24: Statement of Accounts showing Nil Assets & Liabilities certified by a practicing CA which shall not be older than 30 days and initial LLP Agreement if entered into and not filed. Please follow our blog How to Close an LLP in India for detailed info on this.

  9. Hello sir,
    Please help me.our LLP registered on November 2017. Pan and tan has been done.
    We are not open current account.
    My partner had an accident in her family,had a huge lost, so she is not interested. I am not able to continue this LLP.
    Please help sir.

    1. One of the methods of closure is, making an application for strike off to the Registrar as per Rule 37 of the LLP Rules. An LLP which is not carrying on any business for one year or more from the date of making application in Form -24 to Registrar for Closure of LLP pursuant to the aforementioned rule. Additional details can be provided on further analysis of the facts.

  10. Hello sir,
    Me and my partner wants to close LLP which was registered November 2017.
    We just registered LLP Registration only and pan ,tan no.
    We did not open current account .
    My another partner had a accident in her home that’s why she is not interested now.
    Sir please let me know the process to close this LLP.

    1. One of the methods of closure is, making an application for strike off to the Registrar as per Rule 37 of the LLP Rules. An LLP which is not carrying on any business for one year or more from the date of making application in Form -24 to Registrar for Closure of LLP pursuant to the aforementioned rule. Additional details can be provided on further analysis of the facts.

  11. Sir,
    We have incorporated a LLP in may,2014 nd we have file annual filings till 2016 but haven’t filed Form-3. now for further filing we are directed to file form-3 first then only further annual filings can be done and fee for Form-3 is 1.5 lacs which is too high.
    Please suggest some way out to avoid additional fee?
    Or can we apply for co name strike off in form-24? LLP is in working and also registered in GST.
    Thankyou!

    1. Your query requires a detailed analysis of all the facts. Hence, we suggest you to seek a professional advice for your case.
      Nevertheless, we are here to serve you for your general queries.

  12. Hello Maam,
    We, two partners had incorporated a LLP in Oct 2017, and since we had been doing small jobs. My chartered accountant provided certificate of incorporation, LLP Deed. We just got to know that he did not file form 3 yet. Also the form 8 and form 11 are yet due. We now have started working on the same. The bank account of the same is also yet to come.
    As per the conversation with one of my friends, he told that there would be huge penalty for you in this case if you proceed and you should get the same closed or do not proceed with this company as the same will be closed itself from the concerned authorities.
    Please guide us for the same further, whether should be continue or what are the options for us.

    1. As your LLP has been incorporated after 1st October 2017 the filing of Form 11 and Form 8 shall be due in the year 2019. Hence, as on present date you can continue your business by filing e-form 3 (LLP Agreement).

  13. I have filed form 2 and LLP incorporation is over. Now after incorporation within 30 days , we need to file Form-3 .
    But our client insisted to close that LLP as they did not enter into any agreemtn. How to close an LLP if Form-3 is not filed at all, becasue there is no agreement between partners.
    Please help

    1. As per the Amended LLP Rules notified on 20th May, 2017, if the LLP has not filed Form-3, it can directly go for strike off by filing Form-24. However, as per the amendment, copy of initial LLP Agreement, if entered into and not filed, has to be filed with the form. In cases where such agreement is not entered into, the Partners can give clarification letter stating the reasons for not entering into such agreement.

  14. If LLP has cash on hand of Rs.1,00,000 and partners capital account of Rs.1,00,000/-, should LLP repay the cash to partners for showing nil SOA ?
    Is it advisable to show expenditure of Rs. 1,00,000/- and with this nil SOA through capital and negative reserves of Rs.1,00,000/-

    Require your comment.

  15. Sir our LLP was incorporated in the year May 2015 and since then had not filed Form 8 and Form 11 as its was not carrying on any business but the LLP has filed its IT returns. So now can we file form 24 for strike off of LLP directly or do we need to file its overdue filing first?

    1. Assuming that LLP Form 3 has been filed, your LLP will be required to file Form 8 and Form 11 for atleast one financial year. In your case, LLP is required to file form 8 and 11 in 2016 as per the due dates. After that, you can go for strike off through Form 24. So, as on date, you can go for strike off after filing form 8 and 11 for 2016 with late fees

    2. Assuming that LLP Form 3 has been filed, your LLP will be required to file Form 8 and Form 11 for atleast one financial year. In your case, LLP is required to file form 8 and 11 in 2016 as per the due dates. After that, you can go for strike off through Form 24. So, as on date, you can go for strike off after filing form 8 and 11 for 2016 with late fees.

  16. Sir,
    LLP incoporated on 01/03/2017 ,had carried no businees till date can go for dissolution by striking off procedure by filling Form 24 and do i need to wait till 01/03/2018 to carry on procedure of stiking off as form requires IT Return acknowledgement copy.

    Appreciate your suggestion.

    1. The foremost condition to proceed for strike off is that the Company has failed to commence its business within one year of its incorporation. Therefore, you need to wait for a year to end before proceeding for strike off.

  17. Dear Sir,
    I have started an LLP with 2 of my friends in the year 2014, and fortunately all 3 partners got offers in abroad for good and left India for good. We have been informed by our secretary that we need to file returns every year but we did not care about it. But now we want to close the LLP once for all. What is the feasible way to do so? I enquired my company secretary and he said we owe 90k. Else we can’t close.
    Is there any other way to get rid of it.

    Please suggest any better way.
    Thanks in advance.

    Venkat S

  18. Thank you Simrat for the Information.
    Please clear whether Annual Filing is to be done before filing Form 24, in case LLP has Not commenced Business?

  19. Hi Simrat, had one doubt. In case of an LLP who has not done any transaction since incorporation in 2014, will there be any penalty for Form 11&8 if we go for strike-off through Form 24. Also will the Nil Statement of Account , to be submitted , be from 2014 or only for the year 2017. Appreciate your guidance.

    1. As per notification dated 20th May, 2017, the LLPs not carrying on any business can straight away file Form 24 for Strike Off. As for the Statement of Accounts, the same should reflect Nil balances and should no tbe older than 30 days from the date of filing.

      1. Thanks for sharing the information. It is very helpful. Could you please all share a sample format for ‘NIL statement of accounts ‘ I know its a lot to ask but it would be of great help

  20. Thank you, for the useful article. Further it will be great if you help me out from this practical problem and suggest me the Solution. I am facing a practical problem in Striking off the LLP that at the time of filling the Form 24 for striking off the LLP the pre scrutiny error is apperaing that LLP is required to file Form 3 before filling Form 24, however as per the amendments in LLP Rules dated 20th May, 2017 that brings a major reprieve to the LLPs who have not filed Form 3 i.e. the LLP Agreement, as the LLPs can straight away go ahead with the filing of Form 24. Further please note that Annual filling upto the year ended 31.03.2017 is completed. please guide me what to do.

    1. Apologies for the delay in answering to your query. As per our opinion, LLP’S can file Form 24 by attaching a copy of the initial limited liability partnership agreement, if entered into and not filed, where the LLP has not commenced business or commercial operations since its incorporation, as per the amendment in LLP Rules dated 20th May 2017, for striking off. In all other situations it needs to file agreement in form3 LLP before going for strike off. Since, you have done the annual filings for the LLP, the system will require filing of form 3.

  21. Thank you Simrat for such useful information. I had certain queries but after reading this blog post, they are sorted.

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