Closing a business entity in India, whether it's a Limited Liability Partnership (LLP) or a Private Limited Company, requires adherence to specific guidelines set by the Ministry of Corporate Affairs (MCA). Understanding these procedures ensures compliance with legal requirements and facilitates a smooth dissolution process.

This article provides a comprehensive overview of the latest MCA guidelines for closing LLPs and Private Limited Companies in India.

Closure of Limited Liability Partnership (LLP)

An LLP can be closed through two primary methods:

• Declaring the LLP as Defunct
  • If an LLP has not commenced business or has ceased operations for at least one year, it can apply to the Registrar for striking off its name. The process involves:
  • Application Filing: Submit eForm 24 to the Registrar under Rule 37 of the LLP Rules, 2009.
  • Affidavit and Declaration: All designated partners must declare that the LLP has ceased operations, has no liabilities, and indemnify any future liabilities.
  • Statement of Accounts: Provide a statement of accounts disclosing nil assets and liabilities, certified by a Chartered Accountant, not older than 30 days from the filing date.
  • Document Submission: Attach necessary documents, including indemnity bonds, affidavits, consent of partners, and proof of closure of bank accounts.
  • Public Notice: The Registrar will publish a notice on the MCA website for one month for public information. If no objections are received, the LLP's name will be struck off.
     
• Winding Up of LLP
  • Winding up can be:
  • Voluntary Winding Up: Initiated by the partners when the LLP is solvent.
  • Compulsory Winding Up: Ordered by the Tribunal under circumstances such as the LLP being unable to pay its debts.
     
  • Procedure for Voluntary Winding Up:
  • Resolution: Pass a resolution for winding up with the consent of all partners.
  • Declaration of Solvency: Designated partners must declare that the LLP has no debts or that it will be able to pay its debts within a specified period.
  • Creditor's Approval: If the LLP has creditors, seek their approval for the winding-up process.
  • Appointment of Liquidator: Appoint a liquidator to settle the affairs of the LLP.
  • Final Accounts and Dissolution: Prepare final accounts, get them approved by partners and creditors, and file them with the Tribunal for dissolution.
     

Closure of Private Limited Company

A Private Limited Company can be closed through:

• Fast Track Exit (FTE) Mode
  • This method is applicable for defunct companies that have no liabilities and have not been operational.

• Procedure:
  • Application Filing: Submit Form STK-2 to the Registrar with a fee of ₹10,000.
  • Board Resolution: Pass a board resolution approving the closure and authorizing a director to file the application.
  • Affidavit and Indemnity Bond: Directors must provide an affidavit and indemnity bond declaring that the company has no liabilities and is not involved in any litigation.
  • Statement of Accounts: Prepare a statement of accounts showing nil assets and liabilities, certified by a Chartered Accountant, not older than 30 days from the application date.
  • Public Notice: The Registrar will publish a notice in the Official Gazette and on the MCA website for public objection. If no objections are received within 30 days, the company will be struck off.
     
• Voluntary Winding Up:
  • Applicable when the company is solvent and can pay its debts.
     
  • Procedure:
    • Board Meeting: Convene a board meeting to pass a resolution for winding up and appoint a liquidator.
    • Declaration of Solvency: Directors must declare that the company can pay its debts within three years.
    • Creditor's Meeting: Hold a meeting with creditors to seek their approval for winding up.
    • Liquidation Process: The liquidator settles the company's affairs, sells assets, and pays off liabilities.
    • Final Meeting and Dissolution: After settling all affairs, conduct a final general meeting to approve the liquidator's report and file it with the Registrar and Tribunal for dissolution.
       
• Recent Amendments and Updates:
  • LLP Closure: The MCA introduced the Limited Liability Partnership (Amendment) Rules, 2024, effective from August 27, 2024, to streamline the LLP strike-off process. The amendments include the introduction of the Centre for Processing Accelerated Corporate Exit (C-PACE) to handle LLP name strike-off applications, expediting the closure process.
  • Company Closure: The MCA has tightened norms for the closure of companies. Firms applying for removal of their names from the Register of Companies must now file financial statements and annual returns, even if they have ceased business operations. This ensures transparency and compliance during the closure process.

Conclusion
Closing an LLP or a Private Limited Company in India requires meticulous adherence to the MCA's guidelines to ensure a lawful and smooth dissolution process. It's vital to settle all liabilities, file necessary documents, and follow the prescribed procedures diligently. Consulting with legal and financial experts can further facilitate compliance and address any complexities during the closure process.