Procedure for Voluntary Dissolution of a Limited Liability Partnership

Lokik Harit

Lokik Harit

Published on: Jun 9, 2025

Priya Gandhi

Updated on: Jun 9, 2025

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Introduction:

Voluntary dissolution of a Limited Liability Partnership (LLP) refers to the process by which the partners of the LLP decide to terminate the existence of the partnership, typically due to reasons like the achievement of business goals, the partners’ personal reasons, Changes in Business Structure, or the decision to wind up operations. This process involves the formal steps of liquidating the LLP’s assets, settling its liabilities, and ensuring that all legal and financial obligations are met before the partnership ceases to exist.

Applicable Provisions:

1. Section 63 of the Limited Liability Partnership Act, 2008
2. Rule 4, 5, 6, 7, 8, 9, 10, 12, 16, 17, 19, 20 of LLP (Winding up and Dissolution) Rules, 2012

Mandatory Requirements:

1. Approval of majority (at least 3/4th) of partners on the decision to dissolve the LLP
2. Where LLP has creditors, either secured or unsecured, it is compulsory to obtain their approval
3. Declaration of solvency, confirming its ability to repay debts within one year to be filed
4. Appoint Liquidator

Procedure:

1. Obtain consent by passing of a resolution
   Partners shall pass a resolution for voluntary dissolution with at least three-fourth (3/4) majority of total number of its partners.
2. File Form 1 with the Registrar
   LLP shall file the resolution with the RoC, in Form No. 1, within 30 days of passing resolution.
3. Meeting of Creditors:
   • If the LLP has creditors, it must seek their approval for voluntary winding up and send them, either by registered or speed post or other mode as specified in LLP Rules the following:
     • Declaration of solvency
     • Estimated amount of claims due to each creditor
     • An offer for creditors to accept the claims
   • LLP must inform the Registrar of the creditors’ decision, in Form No. 5 within 15 days from the receipt of creditor consent.
   Note:
   • Creditors must provide their opinion and consent that winding up is in the best interest of all partners and creditors, within 30 days of receipt of declaration.
   • Where 2/3rd in value of creditors of the LLP give their consent for winding up, LLP shall within 14 days, thereafter file winding up application.
4. Declaration of Solvency:
   • Majority of the designated partners shall submit a declaration in Form No. 2, verified by an affidavit, stating that the LLP has no debt or can fully pay its debts, within the specified period, not exceeding 1 year from the start of winding up, along with the following:
   • Statement of assets and liabilities prepared in Form No. 4, covering the period from the last prepared account to the latest practicable date, attested by at least 2 designated partners
   • Report of the valuation of the assets of the LLP prepared by a valuer, if there are any assets of the LLP.
   • Such declaration must be submitted to the Registrar, for registration in Form No. 3, within 15 days before the winding-up resolution is passed.
5. Publish Resolution to Wind Up Voluntarily:
   LLP must within 14 days of the receipt of creditors consent, advertise the resolution passed for voluntary winding up, in a newspaper, circulating in the district of its registered office or principal office.
6. Appointment of Liquidator:
   LLP shall appoint a liquidator within thirty (30) days of the following and which will be effective only after the approval of 2/3rd of the creditors in value:
   • Passing of resolution of voluntary winding up, where there are no creditors
   • Filing notice for winding up decision, where there are creditors.
   Note:
   • If creditors reject the liquidator chosen by partners, they can appoint a new one with 2/3rd approval and decide the remuneration.
   • If creditors and partners nominate different liquidators, the creditors’ nominee will be appointed.
   • If the creditors neither approve the liquidator nominated by the partners nor nominate a new one, the liquidator nominated by the partners will be the appointed liquidator.
   • Partners or the creditors, as the case may be, may appoint such committees as they consider appropriate to supervise the voluntary winding up and assist the LLP Liquidator in discharging his functions.
7. Declaration in Form No. 6 by Liquidator:
   LLP Liquidator must file a declaration in Form No. 6, revealing any conflict of interest or lack of independence related to their appointment with the LLP or creditors.
8. Notice of Appointment of LLP Liquidator to Registrar:
   LLP shall within 10 days of appointment or change of liquidator, in Form No. 7, intimate the Registrar, of such appointment or any vacancy therein, indicating their details.
9. Progress Report by Liquidator:
   LLP Liquidator shall submit a quarterly report (for quarters ending on 31st March, 30th June, 30th September and 31st December) in Form No. 8, on the winding up progress, to the partners or creditors, before the end of next quarter.
10. Preparation of Final Reports on Winding Up:
    
    • Liquidator must prepare a report stating the following, in Form No. 9:
      • Manner in which winding up has been conducted
      • Disposal of the LLP’s property and assets
      • Full discharge of debts or satisfaction of creditors
    • Liquidator shall seek approval of the partners or creditors, on such final report and accounts in a meeting.
    Note: Approval may be sought by circulation of relevant resolution in physical form or electronic form, and clarification if any, shall be sought, within 30 days of the date of such circulation.
11. Send Copy of Final Winding Up Accounts and Report to Registrar:
    LLP liquidator shall within 15 days after passing resolution on final winding up accounts and report, send a copy of such final winding up accounts, explanation and report in Form No. 10, to the Registrar.
12. File Application for Order of Dissolution:
    LLP liquidator shall file an application with the Tribunal, along with a copy of the final winding up accounts, explanations and report, for passing an order of dissolution of the limited liability partnership.
13. Order of Dissolution by Tribunal:
    If the Tribunal is satisfied that the winding-up process has been properly followed, it may order the dissolution of the LLP, within 60 days of receiving the application, final accounts, explanations, and report from the LLP Liquidator.
14. File Copy of Dissolution Order with the Registrar:
    LLP Liquidator shall file a copy of the order of dissolution, in Form No 11, with the Registrar within 30 days.
    Note: If the affairs of the LLP are not fully wound up within a period of 1 year from the date of commencement of voluntary winding up, LLP Liquidator shall file an application before the Tribunal explaining the reasons thereof and seek appropriate directions.
15. Distribution of Property of LLP:
    
    • Upon winding up an LLP, its assets will first satisfy its liabilities equally, and the remainder, unless the LLP Agreement states otherwise, will be distributed among the partners based on their rights and interests.
    • All winding-up costs, including the LLP Liquidator’s fee, will be paid from the LLP’s assets, prioritizing secured creditors and workmen, before all other claims.