Procedure for Compulsory Dissolution of a Limited Liability Partnership

Lokik Harit

Lokik Harit

Published on: Jun 5, 2025

Priya Gandhi

Updated on: Jun 5, 2025

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Introduction:

Compulsory dissolution of a Limited Liability Partnership (LLP) is a court-ordered process initiated by a tribunal, like the National Company Law Tribunal (NCLT), for reasons such as insolvency, non-compliance, or when the LLP’s business operations cannot continue.

Limited Liability Partnership (LLP) can be wound up by the Tribunal under the following circumstances:

1. If the LLP is unable to pay its debts or has become commercially insolvent
2. If the number of partners in the LLP falls below two for more than six months
3. If the LLP acts in a way that harms the sovereignty, integrity, security, or public order of India
4. If the LLP fails to file the required Statement of account and Solvency or annual return with the Registrar for five consecutive financial years
5. If the Tribunal believes it is fair and reasonable to wind up the LLP.

Applicable Provisions:

1. Section 63, 64 of the Limited Liability Partnership Act, 2008
2. Rule 26, 28, 29, 31, 32, 34, 36, 37, 38, 39, 40, 42, 56, 61 of LLP (Winding up and Dissolution) Rules, 2012

Mandatory Requirements:

1. Application before the Tribunal for Compulsory Dissolution
2. Appointment of Liquidator

Procedure:

1. File Petition with Tribunal:
   Petition for compulsory winding up is filed with the Tribunal by:
   • LLP or any of its partner or partners*
   • Creditor(s)
   • Registrar of Companies*
   • Central Government or State Government.
   Note:
   • Partner has the right to file a petition for the winding up of an LLP, even if they have already paid their full contribution, or if the LLP has no assets or has no surplus assets remaining after settling its liabilities.
   • Petition for winding up filed by the LLP or any of its partners will only be accepted by the Tribunal if it includes a statement of the LLP’s affairs as of the petition date and a resolution from three-fourths of the total number of partners.
   • Registrar can file a petition for winding up based on the grounds listed in Section 64, except for the one in clause (d). However, the Registrar cannot file a petition on the basis that the LLP is unable to pay its debts unless it is clear from the LLP’s Statement of Accounts and Solvency or an inspector’s report under Section 43 that the LLP cannot pay its debts.
2. Appointment of Liquidator:
   
   • On hearing a winding up petition, Tribunal may, appoint a ‘Liquidator’ as provisional liquidator of the limited liability partnership till the making of a winding up order.
   • For the winding up of an LLP by the Tribunal or the appointment of a Provisional Liquidator, a ‘Liquidator’ will be appointed. This can be either an ‘Official Liquidator’ or a Liquidator selected by the Tribunal from a panel maintained by the Central Government.
   • If no such appointment is made, the Official Liquidator will assume the role of ‘Liquidator’ or ‘Provisional Liquidator’, as required.
3. Declaration in Form No. 6 by Liquidator:
   LLP Liquidator, upon appointment as Provisional Liquidator or Liquidator from panel, shall file a declaration in Form No. 6 disclosing any conflict of interest or lack of independence concerning their appointment with the LLP or the creditors, as applicable. This obligation shall remain in effect for the entire duration of their appointment.
4. Submission of report by Liquidator:
   When Tribunal orders the winding up of an LLP, the Liquidator must submit a report to the Tribunal within 60 days, covering the following information:
   • Details about the assets, their location, and value, including cash on hand, in the bank, and marketable securities. Asset valuations must come from the Liquidator’s panel of valuers
   • Amounts received and still owed from partners
   • Existing and potential liabilities, including creditor details (names, addresses, occupations), and a breakdown of secured and unsecured debts. For secured debts, include information on the securities and their value
   • Details of debts owed to the LLP, including the names and addresses of debtors and the amount likely to be recovered
   • Any guarantees given by the LLP
   • List of partners, any dues payable by them, and details of outstanding contributions.
   • Details of intellectual property and trademarks owned by the LLP
   • Information on any ongoing contracts, joint ventures, or collaborations
   • Details of other companies or LLPs in which the LLP has a stake
   • Information on legal cases involving the LLP, either filed by or against it
   • Details of assets, books, and records taken by the Liquidator
   • If applicable, a plan for the revival or rehabilitation of the LLP
   • Any additional information the Tribunal requests or the Liquidator believes is necessary.
   Additionally, the Liquidator may include in the report details on how the LLP was formed, whether any fraud was committed in its promotion or by any officer, and other matters that the Liquidator thinks should be brought to the Tribunal’s attention.
   Note: Upon winding-up order or the appointment of a Provisional Liquidator, the Liquidator must take custody or control of all the LLP’s property, assets, and claims to protect and preserve them. The Tribunal can:
   • Order any partner, trustee, receiver, banker, agent, officer, or other person associated with the LLP to deliver any money, property, or documents in their possession to the Liquidator or Provisional Liquidator
   • Direct the Chief Presidency Magistrate or District Magistrate to take possession of the LLP’s property, assets, claims, and documents and hand them over to the Liquidator or Provisional Liquidator.
5. Partners to discover and deliver Property, Books to Liquidator:
   • Partners, designated partners, officers, employees (past and present), including the CEO and CFO, must discover and deliver all LLP property, assets, claims, books, and documents to the Liquidator or Provisional Liquidator within 60 days.
   • All relevant persons (partners, officers, employees, including CEO, CFO, and auditors) must fully cooperate with the Liquidator in carrying out their duties.
   • Liquidator may conduct personal interviews with these individuals to investigate the LLP’s affairs. These individuals must attend and provide all required information or answers.
   • Liquidator will maintain records (minutes or memoranda) of these interviews.
   • If there is a failure to cooperate, the Liquidator can apply to the Tribunal for further directions.
   Note:
   • The assets of the LLP will first be used to cover the Liquidator’s costs, including expenses, charges, fees, and remuneration related to the winding-up process.
   • After the Liquidator’s costs are paid, the remaining assets will be used to settle the LLP’s liabilities equally (pari passu) as per the provisions of the Act and rules.
6. Constitution of Committee of Inspection:
   
   • Tribunal can appoint a Committee of Inspection to assist the Liquidator during the winding-up process, which may have up to 12 members, including creditors and partners of the LLP, or their representatives, with proportions agreed by creditors and partners or decided by the Tribunal.
   • Liquidator must call a meeting of partners and creditors within thirty (30) days of the winding up order to decide who will be members of the Committee and must report the results of the meetings to the Tribunal for further directions.
   • Such Committee meets as scheduled, and the Liquidator or any member can call additional meetings when needed.
7. Periodical Report to Tribunal:
   LLP Liquidator shall report quarterly (quarters ending on 31st March, 30th June, 30th September and 31st December) on the progress of winding up of the LLP in Form No. 13 to the Tribunal, as the case may be, which shall be made before the end of the following quarter.
8. Appointment of Professionals:
   
   • Liquidator may, with Tribunal approval, appoint professionals (such as chartered accountants, company secretaries, cost accountants, legal practitioners, or other experts) to assist in carrying out duties under the LLP Act.
   • If the Liquidator appoints someone from a maintained panel, they must report the appointment details, including terms, fees, and funding sources, to the Tribunal.
   • Appointed professionals must disclose any conflict of interest or lack of independence to the Tribunal in Form No. 14.
9. LLP Liquidator’s Annual Statement of Accounts and Verification:
   LLP Liquidator must prepare a statement of accounts each year, as of March 31st, in Form No. 15 within 2 months thereof which shall be verified by a declaration.
10. Tribunal Order to be filed with Registrar:
    
    • The Tribunal upon passing orders of winding up of an LLP, will send notice of such order to the Liquidator and the Registrar, in Form No. 12 within 15 days from the date of the order.
    • After the winding-up order is made, the petitioner and the LLP must file a certified copy of the order with the Registrar within 15 days.
    • Upon receiving the notice, the Liquidator must send a notice to the LLP’s registered office by registered post and serve notices to the partners, designated partners, officers, employees (including the CEO, CFO), auditors, and secured creditors, if any, within 15 days. This notice is for the purpose of taking custody of the LLP’s property, assets, claims, books of accounts, and other documents.
    • Such winding-up order will serve as a notice of discharge to the officers, employees, and workmen of the LLP, unless the business of the LLP is continued.
    • An order of winding up of an LLP shall operate in favour of all the creditors and all the partners.
    • Upon receiving the notice, the Registrar will update its records and publish the order in the Official Gazette.