Strike off of Limited Liability Partnership
Ministry of Corporate Affairs has streamlined processes for smooth functioning of Companies and Limited Liability Partnerships and recent amendments towards strike off mechanism gives a fair chance to entrepreneurs to close an inactive or non-operational LLP in a proper and legally compliant manner.
The entrepreneurs can voluntarily apply for strike off of an inactive or non-operational LLP to avoid future penalties, notices and unnecessary compliance burden.
The voluntary strike off mechanism aids entrepreneurs to get a clean, legitimate, and dignified exit from a non-functional structure of their business that allows them to close the chapter on an inactive LLP
We provide end to end guidance for Striking off your Limited Liability Partnership (LLP) under the provisions of the Limited Liability Partnership Act, 2008 smoothly, compliantly and without unnecessary complications.
Strike off of Limited Liability Partnership
Strike off of Limited Liability Partnership is a convenient and easy process through which dormant or defunct LLPs can get their name removed from the register of LLPs.
Which LLPs are eligible for voluntary Strike off?
The eligible LLPs for voluntary Strike off shall be those who: -
- have not carried on any business or operation, or
- have ceased to carry on business and wish to close the LLP permanently.
Once Centre for Processing Accelerated Corporate Exit (C-Pace) approves the strike off of your LLP, the LLP is treated as dissolved.
Voluntary Strike of process is distinct from winding up, which is a far more elaborate and time-consuming process involving the National Company Law Tribunal and typically applies to LLPs that have outstanding assets, liabilities, or creditors to be dealt with.
Prerequisites for Strike off of Limited Liability Partnership
There are certain pre-requisites before applying for Strike off of Limited Liability Partnership to avoid potential delays in approval process.
You may only apply for Strike off of Limited Liability Partnership if you meet the fellow specified pre-requisites: -
- No active business activity: - The LLP shall not be carrying any active business activity.
- No Pending Litigation: - There should not be any active or pending litigations or disputes by or on the LLP.
- Settlement of dues: - The LLP should settle all its liabilities and dues before proceeding for Strike off of Limited Liability Partnership.
- No Secured Creditors Due: - The LLP shall make sure that there are no secure creditors or consent has been obtained from them before proceeding for Strike off of Limited Liability Partnership.
- No pending Statutory returns: - The LLP should ensure that LLP has filed the annual return forms (Form 8 & Form 11) up to the year of cessation and other completed other legislative filings before applying for Strike off of Limited Liability Partnership.
Step-by-Step Process of Strike off of Limited Liability Partnership through E-form 24 (C-PACE Strike off)
The Ministry of Corporate Affairs amended the LLP Rules and introduced the strike off of LLP through C-PACE (Centre for Processing Accelerated Corporate Exit) which was earlier managed by Registrar of Companies. This introduction was made for more efficient and streamlined exit process for businesses, including LLPs.
Let’s uncover the full Step-by-Step Process of Strike off of Limited Liability Partnership through E-form 24: -
Eligibility Check
- Step 1: Readiness
- Step 2: Partner Consent
The LLP shall ensure that it hasn't traded for 12 months. Clear all debts and officially close all business bank accounts.
Hold a meeting where all partners agree to the closure. Draft a formal resolution signed by everyone involved.
Paperwork
- Step 3: Financial Audit
- Step 4: Legal Pledges
Have a CA prepare a Statement of Accounts showing "Nil" assets/liabilities. This must be dated within 30 days of filing.
Prepare Indemnity Bonds and Affidavits on stamp paper. These are legal promises that partners will pay if any old debts pop up later.
Digital Filing
- Step 5: Web-Form 24
- Step 6: Professional Signature
Log into the MCA V3 Portal and fill out the web-form. Upload your documents and have all partners sign using their DSCs.
A practicing CA/CS/CMA must digitally sign the form to verify that all your claims and documents are authentic.
Exit
- Step 7: C-PACE Review
- Step 8: Final Strike-Off
The Centralized Centre reviews the file and publishes a 30-day public notice. They check for any hidden tax or legal issues.
If no one objects within the notice period, the Registrar dissolves the LLP. The name is officially removed from the Government Register.
Key Documents required for Strike off of Limited Liability Partnership
If you are planning to strike off of your LLP, you must collect the following documents before initiating the process of Strike off of Limited Liability Partnership: -
Consent Letter from all the Partners of LLP: The LLP shall obtain formal consent letter that serves as formal declaration of unanimity among the partners to voluntarily Strike off their Limited Liability Partnership.
Notarized Affidavit and Indemnity Bond from All Designated Partners: The LLP shall obtain Notarized Affidavit and Indemnity Bond that serve as the legal guarantee provided by the Designated Partners to the Registrar.
CA certified statement of accounts: The LLP shall obtain statement of accounts certified by a practicing Chartered Accountant and shall not older than 30 days from the date of filing.
Latest Income Tax return (if applicable): The LLP shall keep in record the (Latest Income Tax return, if filed that serves as fiscal "clearance certificate" for an LLP.
Copy of LLP Agreements and amendments thereto: The LLP shall keep ready the copy of LLP Agreements and subsequent amendment copies as they record changes in partners, profit-sharing ratios, or business activities.
Bank Account Closure certificate: The LLP shall close its bank accounts and obtain certificate issued by the bank.
Key Benefits of Voluntary Strike Off of an LLP
No More Compliance Burden
This removes the need to submit financial statements (Form 8) and annual reports (Form 11) to the Registrar of Companies annually.
Prevents Penalties and Late Fees
It keeps a non-operational Limited Liability Partnership from accruing penalties and late filing fees that compound annually.
Protection from Statutory Notices
This protects approved partners from the Registrar of Companies' notices, show-cause letters, and legal action for non-compliance.
Prevents Partner Disqualification
It safeguards designated partners' future business appointments by preventing them from being disqualified for persistent non-compliance with the LLP.
Clean and Legally Recognized Closure
This gives the closure full legal finality by providing an official dissolution that is recorded in the Official Gazette.
Cost-Effective Exit
In comparison to the official winding up procedure prior to the NCLT, this is one of the easier, quicker, and less expensive processes.
Completes Tax and GST Filing Obligations
This completes the entity's income tax and GST filing responsibilities, removing the requirement to file returns for an LLP that isn't operating.
Preserves Professional Reputation
By acting responsibly and legally, it upholds the standing and integrity of the chosen partners.
Freedom to Pursue New Ventures
Its partners are permitted to proceed with fresh business concepts free from the weight of an unresolved, dormant organization.
Frequently Asked Questions (FAQs)
How long does the process of Strike off of Limited Liability Partnership take?
The process of Strike off of Limited Liability Partnership usually takes 60-75 days provided there are no objections and all documents are in order. The C-PACE initiative aims to expedite the process compared to traditional methods.
Can anyone object to the strike-off application of Limited Liability Partnership?
Yes, during the 30-day period after publication of the notice, any person, including creditors, partners, or regulatory authorities, can file objections if they have valid grounds to oppose the strike-off.
Can a struck-off LLP be restored back?
Yes, within 3 years of strike-off, an application can be made to the Tribunal for restoration of the LLP's name if there are valid grounds, such as the strike-off being unjust or the LLP being still required for certain purposes.
What are the fee requirements for Strike off of Limited Liability Partnership?
The fees vary based on the LLP's contribution amount and are prescribed in the LLP Rules. You should check the current fee structure on the MCA portal as it may be updated periodically.
Is professional assistance recommended for the strike-off process?
Partners cannot file the application for strike off of an LLP on their own, as certification by a practising professional is mandatory under the LLP Act and MCA rules. The strike-off application must be prepared, filed, and certified by a qualified professional such as a Practising Company Secretary. Engaging experts like My Legal Business LLP ensures complete statutory compliance, avoids rejection, and enables a smooth, timely, and legally compliant strike-off of your Limited Liability Partnership.
Is it mandatory to settle all tax dues before applying for strike-off?
Yes, all direct and indirect tax liabilities, including income tax, GST, and professional tax, must be cleared. Tax clearance certificates may be required as supporting documents.
Which law governs Strike off of Limited Liability Partnership?
Section 75 of the Limited Liability Partnership Act, 2008 and Rule 37 of the LLP Rules, 2009 amended in 2017 governs the provisions related Strike off of Limited Liability Partnership.
Can a designated partner be penalised after strike off?
Yes. If it is found that the LLP was carrying on business at the time of strike off, or false declarations were made, designated partners can face penalties and personal liability.
