Closing of LLP
Strike off or closure of a Limited Liability Partnership (LLP) is the legal process of dissolving an LLP that is no longer carrying on business or has become defunct. LLPs may be struck off for various reasons including business failure, completion of business objectives, or voluntary closure by partners. The strike off process can be initiated voluntarily by the LLP through the Fast Track Exit (FTE) mode or Strike Off application, or involuntarily by the Registrar of Companies (ROC) for non-compliance. The process involves settling all liabilities, obtaining necessary clearances, filing required forms with the Ministry of Corporate Affairs (MCA), and ensuring compliance with tax and regulatory requirements. Proper closure is essential to avoid future legal complications and liabilities for partners.
Why Close an LLP?
- Business Failure: LLP has failed to achieve its business objectives and is no longer viable
- Completion of Object: LLP has completed the specific purpose for which it was incorporated
- Financial Losses: Continuous losses making business operations unsustainable
- Market Conditions: Unfavorable market conditions or industry downturn
- Strategic Decision: Strategic decision to close business and pursue other opportunities
- Merge/Acquisition: LLP being merged or acquired by another entity
- Regulatory Issues: Inability to comply with increasing regulatory requirements
- Retirement: Partners retiring with no succession plan
- Non-Compliance: LLP wants to avoid penalties for non-compliance by closing properly
- Cost Savings: Avoiding ongoing maintenance costs and compliance expenses
Types of LLP Closure
- Voluntary Strike Off: LLP voluntarily applies for strike off through FTE or normal mode
- Involuntary Strike Off: ROC strikes off LLP for non-compliance (no filings for 2+ years)
- Fast Track Exit (FTE):strong> Quick closure for dormant LLPs with no assets/liabilities
- Normal Strike Off: Standard closure process for LLPs with assets/liabilities
- Winding Up: Formal winding up process through National Company Law Tribunal (NCLT)
- Defunct LLP Closure: Closure of LLPs that have not commenced business or ceased operations
- Amalgamation/Merger: Closure through merger with another LLP or company
Eligibility for Fast Track Exit (FTE)
- No Business Activity: LLP has not carried on any business activity or operation
- No Assets/Liabilities: LLP has no assets and liabilities as on application date
- No Pending Litigation: No legal proceedings pending against the LLP
- No Tax Dues: No outstanding tax liabilities with income tax, GST, or other authorities
- No Statutory Dues: No dues to employees, creditors, or government authorities
- Not Listed: LLP is not listed on any stock exchange
- Not Converted: LLP has not converted from one type to another in past 3 years
- No Public Deposits: LLP has not accepted public deposits
- No Secured Loans: LLP has not taken any secured loans
- Filing Compliance: LLP has filed all statutory returns up to date
Detailed Procedure: Fast Track Exit (FTE)
| Step |
Action |
Timeline |
Responsible |
| 1 |
Convene partner meeting to approve strike off |
Day 1 |
Partners |
| 2 |
Pass partner resolution for FTE application |
Day 1 |
Partners |
| 3 |
Obtain consent of all partners (75% majority) |
Day 5-10 |
Partners |
| 4 |
File all pending statutory returns |
Day 10-20 |
LLP Management |
| 5 |
Obtain NOC from tax authorities |
Day 20-30 |
Tax Authorities |
| 6 |
File Form 11 with MCA |
Day 30-35 |
Professional/LLP |
| 7 |
ROC verification and approval |
Day 35-60 |
Registrar of Companies |
| 8 |
Strike off notice published in Gazette |
Day 60-90 |
Registrar of Companies |
| 9 |
LLP name removed from register |
Day 90-120 |
Registrar of Companies |
Documents Required for LLP Strike Off
- LLP Incorporation Certificate
- Existing LLP Agreement
- Partner resolution for strike off
- Notice of partner meeting
- Consent of all partners
- Latest audited financial statements
- Nil balance sheet and profit & loss account
- Affidavit from partners (no assets/liabilities)
- Indemnity bond from partners
- Statement of accounts (assets/liabilities)
- NOC from income tax department
- NOC from GST department (if registered)
- NOC from secured creditors (if any)
- Closure of bank accounts (certificate)
- Form 11 application
- LLP PAN card copy
- DPIN numbers of all partners
- LLIN of the LLP
- Proof of closure of all registrations
Forms Required for LLP Strike Off
| Form |
Purpose |
Filing Timeline |
Attachments |
| Form 11 |
Application for strike off of LLP |
After obtaining all NOCs |
Partner resolution, affidavit, indemnity bond, NOCs |
| Form 3 |
Filing supplementary LLP Agreement (if required) |
Within 30 days of execution |
Supplementary LLP Agreement, consent of partners |
| DIR-3 KYC |
Partner KYC (must be up to date) |
Before strike off application |
Partner PAN, Aadhaar, address proof |
Key Compliance Requirements Before Strike Off
- Tax Clearance: Obtain NOC from income tax department (no pending tax dues)
- GST Cancellation: Cancel GST registration (if registered)
- Bank Account Closure: Close all bank accounts of the LLP
- Asset Disposal: Dispose of all LLP assets properly
- Liability Settlement: Settle all liabilities with creditors and suppliers
- Employee Settlement: Settle all employee dues (salary, gratuity, PF, ESIC)
- Statutory Filings: File all pending statutory returns (MCA, GST, Income Tax)
- License Cancellation: Cancel all business licenses and registrations
- DPIN Deactivation: Partners may apply for DPIN deactivation after strike off
- Record Preservation: Preserve LLP records for 8 years after strike off
Important Points to Note
- Partner Liability: Partners remain liable for LLP liabilities even after strike off
- Asset Disposal: All assets must be disposed before strike off application
- Liability Settlement: All liabilities must be settled before closure
- Timeline: Complete process typically takes 90-120 days
- Filing Fees: Government filing fees apply for strike off application
- Professional Fees: Professional fees for documentation, filing, and compliance support
- Record Preservation: LLP records must be preserved for 8 years after strike off
- Penalties: Non-compliance attracts heavy penalties under LLP Act
- Revival Possibility: Struck off LLP can be revived within 20 years with NCLT approval
- Partner Disqualification: Partners of struck off LLPs face DPIN disqualification for certain period
- Credit Impact: Strike off may impact credit rating of partners
- Legal Validity: Strike off is effective only after ROC approval and Gazette notification
Comparison: FTE vs Normal Strike Off
| Aspect |
Fast Track Exit (FTE) |
Normal Strike Off |
| Eligibility |
No assets, no liabilities, no business activity |
LLPs with assets/liabilities |
| Timeline |
90-120 days |
6-12 months (or longer) |
| Process |
Simplified process with minimal documentation |
Detailed process with comprehensive documentation |
| Cost |
Lower government fees |
Higher government fees |
| Approval |
ROC approval required |
ROC approval + NCLT approval (in some cases) |
| Complexity |
Low complexity |
High complexity |
Consequences of Involuntary Strike Off
| Consequence |
Description |
Impact |
| Partner Disqualification |
Partners disqualified for 3-5 years |
Cannot become partner in other LLPs |
| Asset Forfeiture |
LLP assets may be forfeited to government |
Loss of LLP assets |
| Legal Action |
Creditors can take legal action against partners |
Personal liability for LLP debts |
| Tax Penalties |
Heavy tax penalties and interest |
Financial burden on partners |
| Credit Impact |
Negative impact on credit rating |
Difficulty in obtaining loans/credit |
| Revival Difficulty |
Revival requires NCLT approval and is expensive |
Costly and time-consuming process |
Penalties for Non-Compliance
- LLP Penalty: Fine ranging from ₹1 lakh to ₹10 lakh for non-compliance
- Partner Penalty: Fine ranging from ₹1 lakh to ₹10 lakh for individual partners
- Additional Fees: Additional government fees for delayed filings
- Disqualification: Partners disqualified for 3-5 years from holding partner positions
- Legal Action: Prosecution under LLP Act for willful default
- Asset Forfeiture: LLP assets may be forfeited to government
- Personal Liability: Partners may face personal liability for LLP debts
- Tax Penalties: Heavy tax penalties and interest for non-compliance
- Banking Issues: Permanent impact on credit rating and banking relationships
- Reputation Damage: Severe damage to professional reputation
Benefits of Professional LLP Strike Off
- Expert Guidance: Professional assistance throughout the strike off process
- Compliance Assurance: Ensures compliance with all LLP Act requirements
- Timely Filing: Timely filing of all necessary forms with MCA
- Documentation: Proper preparation and maintenance of all documents
- Partner Support: Assistance in conducting partner meetings and drafting resolutions
- Tax Clearance: Help in obtaining NOCs from tax authorities
- Regulatory Liaison: Liaison with ROC and other regulatory authorities
- Asset Disposal: Guidance on proper disposal of LLP assets
- Liability Settlement: Assistance in settling all liabilities properly
- Risk Mitigation: Avoids penalties and legal complications
- Peace of Mind: Allows management to focus on closure without stress
Post-Strike Off Requirements
- Record Preservation: Preserve LLP records for 8 years after strike off
- DPIN Deactivation: Partners may apply for DPIN deactivation after strike off
- PAN Surrender: Surrender LLP PAN card after strike off
- Bank Account: Ensure all bank accounts are closed
- License Cancellation: Confirm cancellation of all business licenses
- Asset Disposal: Ensure all assets are properly disposed
- Liability Settlement: Confirm all liabilities are settled
- Employee Settlement: Confirm all employee dues are paid
- Tax Compliance: Confirm all tax liabilities are cleared
- GST Cancellation: Confirm GST registration is cancelled
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