PROCESS OF STRIKE OFF OF THE LIMITED LIABILITY PARTNERSHIP
PROCESS OF STRIKE OFF
OF THE LIMITED LIABILITY PARTNERSHIP
SHORT SUMMARY:
In this Flash editorial,
the author begins by referring the provision of the LLP Act, 2008 concerning to
Strike off of LLP. In case the LLP wants to close down its business or where it
is not carrying on any business operations, it can make an application to the
Registrar of Companies for declaring the company as defunct and removing the
name of the LLP from its register of LLP’s.
The main thrust of the
article, however, is upon the LLP Notification dated: 16th May, 2017
(http://www.mca.gov.in/Ministry/pdf/LimitedLiabilityPartnershipAmendmentRules2017_22052017.pdf) with reference to LLP (Amendment) Rules, 2017. These rules came into force w.e.f. 20th
May, 2017. Through this notification MCA has amend the provisiosn relating to
strike off of LLP.
This is article no. 237 of the series of editorials
written by the author on corporate laws {including Companies Act, 2013, SEBI,
RBI Regulations, IBC, LLP Act, 2008 etc.}.
Introduction:
When a person moves
toward decision on the subject of strike off of LLP, many questions lift up, like:
Whether Company have to complete Annual Fillings with ROC (E form LLP-8 and
LLP-11), Whether company have to file LLP Agreement before strike off of LLP,
if company fails to file at the time of incorporation or whether company have
filed the Income Tax Returns with Department etc. The answers of all these
questions have been given by MCA in its notification dated 16th May,
2017. In this editorial we will discuss
the notification in relation to above mentioned questions:
Situation: 1
Regular e-forms Requirements &
Other Requirements:
|
S. No.
|
Agenda
|
Particulars
|
e-forms
|
Due Date Form Filling
|
|
STATEMENT OF ACCOUNT & SOLVENCY
|
A “Statement of Accounts and Solvency” in prescribed form shall be
filed by every LLP with the Registrar every year. sub-section (3) of section
34
|
LLP-8
|
30th October
|
|
|
ANNUAL RETURN
|
Every LLP
would be required to file annual return in Form 11 with ROC within 60 days of
closer of financial year.
|
LLP-11
|
30 May
|
A. Whether Company have to
complete Annual Fillings with ROC (E form LLP-8 and LLP-11) before filling
application for Strike off of LLP.
Statutory Provisions Contained Under the Act:
Provisions of Strike off
of LLP are given in clause (b) of sub rule 1 of Rule 37 of LLP Rules 2008. As
per rules, there is no provisiosn for exemption from the filing of e-form LLP-
8/ 11 for strike off of LLP. Therefore, every LLP have to complete annual
filing before strike off of LLP.
However, by LLP
Amendment Rules, 2017 situation has been changed. Extract of the Amendment
Rules “The limited liability partnership referred to in clause (b) of
sub-rule (1) of rule 37 shall, file overdue returns in Form 8 and Form 11 up to
the end of the financial year in which the limited liability partnership [1]ceased to carry on its business or
commercial operations before filing of form for strike off”.
Interpretation Note:
As per the language of amendment
rules LLP shall file overdue returns in Form 8 and Form 11 “up to the end of
the financial year” in which LLP “ceased to carry on its business or
commercial operation”.
Hence, considering the
provisions of amendment rules one can opine that if a non operational LLP [2] desires to strike off it must complete the
filing of Form 8 and Form 11 (Here after referred as “Annual Filing”) up to the end of the financial year in which the
limited liability partnership ceased to carry on its business or commercial
operations.
Like: If a LLP
Incorporated on 10th April, 2010. It ceases / stops to carry on its
business from 20th February, 2013 (F.Y. 2012-13).
Situations: (i) LLP has completed filing of e-forms LLP - 8 / 11 till 31.03.2017. (ii)
LLP has filed e-forms LLP - 8 / 11 for end of financial
year 31st March, 2013. (iii) LLP has not filed e-forms LLP - 8 / 11 since incorporation.
Situation Analysis:
(i) If LLP has completed
Annual filing till the date of strike off, then no question arise in respect of
completion of Annual Filing. LLP can go for strike off as per rule 37.
(ii) In this situation,
LLP has filed annual filing form till the financial year ended 31.03.2013 (the
last financial year in which LLP was operational). From 1st April,
2013 LLP has not done any business or not carried any business.
Therefore, as per
amendment rule, 2017 LLP can file application for strike off of LLP with ROC
without completion of annual filing forms since financial year 2013-14.
(iii) In this situation,
LLP has not filed annual form since incorporation. However, if LLP wants to
apply for strike off under rule 37 then as per amendment rules it has to
complete annual filing till the financial year 2012-13. [Late fee for
completion of annual filing form is INR 100 per day till the date of filing of
form].
Check Points:
I.
LLP should not be
carrying any business or should be non operational at least for a period of one
year.
II.
Check – Whether LLP has
filed annual forms till the date when it ceased to carry on its business or
commercial operations.
B. Whether Company have to filed
Initial LLP Agreement and any amendment in LLP Agreement (E form LLP-3) with
ROC before filling application for Strike off of LLP.
Statutory Provisions Contained Under the Act:
LLP rules don’t provide
any exemption from the filing of LLP agreement in e-form LLP 3 with ROC. Therefore,
before filing of application for strike off it has to file LLP Agreement with
ROC.
However, by LLP
Amendment Rules, 2017 situation has been changed. Extract of the Amendment
Rules “LLP file e-form 24 enclosed with copy of the initial limited
liability partnership agreement, if entered into and not filed, along with
changes thereof in cases where the Limited Liability Partnership has not
commenced business or commercial operations since its incorporation.”
Interpretation Note:
As per the language of amendment
rules LLP shall enclose copy of initial LLP Agreement “if entered into and
not filed” “along with any change in agreement” “in cases where the Limited
Liability Partnership has not commenced business or commercial operations since
its incorporation
Hence, considering the
provisions of amendment rules one can opine that if a LLP is non-operational
since incorporation, it can file application for strike off without filing of e
form LLP-3 with ROC.
Situations: (i) If a
LLP Incorporated on 1st April, 2011. It ceases / stops to carry on
its business from 10th January, 2014 (F.Y. 2013-14). It has not
filed LLP-3 with initial LLP Agreement. Whether it can apply for strike off
without filing of LLP-3?
Situations: (ii) If a LLP Incorporated on 1st April,
2011 and has not commence business since incorporation. It has not filed LLP-3
with initial LLP Agreement. Whether it can apply for strike off?
Situations: (iii) If a LLP Incorporated on 1st April,
2011. It ceases / stops to carry on its business from 10th January,
2014 (F.Y. 2013-14). It has entered into amendment LLP agreement and not filed
LLP-3 with such amendment Agreement. Whether it can apply for strike off
without filing of LLP-3?
Situation Analysis:
(i)
In this case
the LLP has commenced business and forget to file the Initial LLP Agreement then
as per amendment rule if the desires to apply for strike off its have to file
LLP-3 with initial LLP Agreement.
(ii) In this case LLP has not commenced business or
operation since incorporation and not filed initial LLP Agreement and any
amendment in LLP Agreement.
Therefore, as per
amendment rule, 2017 LLP can file application for strike off of LLP with ROC
without completion of filing of forms LLP – 3.
(iii)In
this Case LLP has commenced business, file the initial LLP Agreement with ROC
but fails to file the amendment in the initial LLP Agreement. However, if LLP
wants to apply for strike off under rule 37 then as per amendment rules it has
to file Amendment in initial LLP Agreement in LLP-3 with ROC. [Late fee for
filing form is INR 100 per day till the date of filing of form].
Check Points:
I.
Check – Whether LLP has
filed Initial LLP Agreement.
II.
Check – Whether LLP has
filed Amendment in initial LLP Agreement, if any.
III.
If LLP not file any of
above two agreements then Check – Whether LLP commenced any business or
operation since incorporation.
Process – Strike Off LLP
In case the
LLP wants to close down its business or where it is not carrying on any
business operations for the period of one year or more, , it can make an application to the Registrar of Companies for declaring
the company as defunct and removing the name of the LLP from its register of
LLP’s. The procedure is given below: (clause (b) of sub
rule 1 of Rule 37 of LLP Rules 2008)
An
application is required to be made in e-Form 24 to the Registrar of
Companies for Striking off the name of the LLP under Rule 37(1)(b) and 37(1A)
of LLP Rules with following below mentioned documents:
File e-form 24
with following documents:
a) a statement of
account disclosing nil assets and nil liabilities, certified by a Chartered
Accountant in practice made up to a date not earlier than thirty days of the
date of filing of Form 24.
b)
Copy of acknowledgement of latest Income tax return- Self
Explanatory
c)
copy of the initial limited liability partnership agreement,
if entered into and not filed, along with changes thereof
d)
an affidavit signed by the designated partners,
either jointly or severally, to the effect,—
(i) that the Limited Liability Partnership has not commenced
business or where it commenced business, it ceased to carry on such business
from ………….(dd/mm/yyyy);
(ii) that the limited liability partnership has no liabilities and
indemnifying any liability that may arise even after striking off its name from
the Register;
(iii) that the Limited Liability Partnership has not opened any
Bank Account and where it had opened, the said bank account has since been
closed together with certificate(s) or statement from the respective bank
demonstrating closure of Bank Account;
(iv) that the Limited Liability Partnership has not filed any
Income-tax return where it has not carried on any business since its
incorporation, if applicable.
e)
Copy of Detailed Application- Mention full details of LLP
plus reasons for closure
f)
Copy of Authority to Make the Application- Duly signed by all
the Partners.
(Author – CS Divesh Goyal,
GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can
be contacted at csdiveshgoyal@gmail.com)
Disclaimer: The entire
contents of this document have been prepared on the basis of relevant
provisions and as per the information existing at the time of the preparation.
Although care has been taken to ensure the accuracy, completeness and
reliability of the information provided, I assume no responsibility therefore.
Users of this information are expected to refer to the relevant existing
provisions of applicable Laws. The user of the information agrees that the
information is not a professional advice and is subject to change without
notice. I assume no responsibility for the consequences of use of such
information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT,
SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION
WITH THE USE OF THE INFORMATION.
[1]
The date of cessation of commercial operation is the date from which the
Limited Liability Partnership ceased to carry on its revenue generating
business and the transactions such as receipt of money from debtors or payment
of money to creditors, subsequent to such cessation will not form part of
revenue generating business
[2]
As per Rule 37 of LLP Rules if a LLP wants to strike
off it should not carrying on any business
operations for the period of one
year or more.
you are awesome you cleared my confusion very well,explained so well .thank you once again
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