LIMITED LIABILITY PARTNERSHIP(LLP)

• Limited Liability Partnership (LLP) is a hybrid form of business structure that infuses the
operational flexibility and tax advantages of a traditional partnership firm with the
limited liability and perpetual existence features of a corporate entity. Therefore, it is
considered to be an attractive investment option by foreign investors, venture
capitalists, professionals and service providers etc. who can go in for this alternative
business vehicle rather than following traditional investment routes of joint
ventures/wholly owned subsidiaries.
• Section 2(1)(n) of the LLP Act defines Limited Liability Partnership as ‘a partnership
formed and registered under this Act’. But considering the nature of an LLP, it can be
defined as ‘a body corporate having a separate legal entity, with a perpetual existence
,common seal and carrying limited liability’.
• A company registered in India, whether private or public, has to comply with host of
complex formalities and incur additional costs for managing affairs including mandatory
board meetings, maintaining of statutory records etc. But for LLP, such mandates are
not prescribed. Further, it enjoys certain benefits like non applicability of dividend
distribution tax, relaxation of many detailed legal and procedural requirements.
LIMITED LIABILITY PARTNERSHIP ACT,2008
• Limited Liability Partnership Act came into force for most of the provisions on 31st
March 2009 and for remaining provisions on 31st May 2009 and applies to the
whole of India.
• It comprises of XIV chapters, containing 81 sections and 4 schedules. The first
schedule is a model set of terms of LLP agreement. The second schedule contains
provisions for conversion of a firm into LLP. The third schedule contains provisions
for conversion of a private limited company into LLP. The fourth schedule contains
provisions for conversion of an unlisted public limited company into LLP.
• Regulatory Framework of LLPs in India
ASPECTS REGULATED BY
LEGAL LLP ACT,2008; LLP RULES,2009; LLP(AMENDMENT) RULES ETC.
ADMINISTRATIVE MINISTRY OF CORPORATE AFFAIRS , REGISTRAR OF COMPANIES
TAXATION INCOME TAX ACT,1961; VARIOUS FINANCE ACTS
WINDING UP INSOLVENCY AND BANKRUPTCY CODE,2016; NCLT
SALIENT FEATURES OF LLP
• LLP is a body corporate. It is incorporated under the LLP Act,2008. For this, ,two or more persons shall subscribe
their names to the Incorporation document; file it along with prescribed fees and other required documents with
the concerned Registrar of Companies. If these are found in order, the ROC issues Certificate of Incorporation
which grants it the status of the body corporate.
• LLP is an artificial legal person.
 Artificial → It comes into existence by a process other than natural birth and does not have the physical
attributes- like soul, limbs, eyes, ears etc.- that natural persons have.
 Legal → It is created after complying with certain formalities. It is intangible, invisible and exists only in the
eyes of the law .
 Person → Like other persons, it also enjoys certain rights and obligations, for example, it may sue or be sued,
it may acquire and/or dispose of properties, it has a name etc.
• LLP is a separate entity .This means it enjoys an independent identity distinct from its partners. All the assets and
liabilities of the LLP are in the name of LLP only and belong to LLP alone. Partners of LLP shall not have any
insurable interest in the property of the LLP. Similarly, the creditors and liabilities of LLP are obligaton of LLP only
and shall be paid/met out of the property of the LLP.
• It has perpetual existence. LLP enjoys a stable life. Events such as death, insolvency, retirement or resignation of
any or all partners do not affect its continuity. It is created through a legal process and can be brought to an end
by a legal process only.
• LLP may have a common seal and it is not a mandatory requirement. A common seal is a stamp like object with
name of the LLP and date of its incorporation engraved on it and used as a substitute for its signature.
• The partners of LLP have limited liability. This implies that the obligation of LLP can be settled out from the
properties of LLP and will not extend to its partners’ personal assets. The liability of the partners shall be limited
to the extent of their agreed contribution except in case of unauthorized acts, fraud or negligence committed by
them. Creditors of LLP can claim authority over the LLP only and not over the partners or their assets.
SALIENT FEATURES OF LLP
• Minimum and maximum number of partners –To form an LLP, minimum 2 partners are required. Further, an
LLP shall also have 2 individuals as designated partners of whom, at least one shall be resident in India.
There is no limit on maximum number of partners in LLP.
• Contribution by partners – In order to garner funds to run the business of LLP, the partners shall contribute
to the capital of LLP in accordance with the LLP agreement. The LLP Act does not prescribe any minimum
capital contribution and it could be in the form of movable or immovable property, tangible or intangible
assets, cash or other benefits such as contracts for service. The monetary value of such contribution shall be
accounted for and disclosed in the accounts of the LLP.
• Mutual rights and duties of partners. For the smooth working of LLP and avoidance of future disputes, it is
desirable to have an LLP agreement containing mutual rights or duties of partners inter se and that of LLP vis-
a -vis its partners. If there is no LLP agreement then the LLP can adopt the First schedule of the Act which is a
model set of LLP agreement.
• No mutual agency amongst partners. This implies that every partner of the LLP is an agent of LLP and not of
other partners. Therefore, a partner shall not be personally responsible for any wrongful
act/omission/misconduct committed by other partners.
• Whistle blowing by partners or employees- –The LLP Act provides adequate safeguards and protection to a
whistle blower i.e. a person who informs the authorities or public about something wrong or illegal cooking up in
the organisation. Sec.31 of the LLP Act provides that if an employee or partner of the LLP has provided useful
information and cooperation during the investigation of an LLP for any alleged dishonesty, fraud ,unethical
practice or offence, then the Court or Tribunal may reduce or waive off penalty leviable against him. Further he
cannot be suspended, removed, demoted, threatened, harassed or discriminated against in any manner merely
because of his providing information to the authorities.
• E filing of documents by partners – Every form, application or document which is to be submitted under the Act
or the Rules shall be filed in prescribed electronic mode on the website www.mca.gov.in after being authenticated
by designated partners by affixing digital or electronic signatures.
SALIENT FEATURES OF LLP
• Business of LLP- An LLP can be formed to carry any lawful business, trade, profession, service or
occupation with a view to earn profit. However, LLPs can’t be formed for charitable or philanthropic
purposes.
• Management of LLP- The business of LLP shall be managed by the partners of LLP. However, for legal
compliances, designated partners are responsible
• Accounts of LLP- Every LLP shall be required to maintain proper books of account reflecting true and
proper view of its state of affairs. Further, every year, it shall file with the Registrar, the Statement of
Accounts and Solvency as well as Annual Return within the prescribed time period.
• Audit of LLP –As per LLP Rules 2009, every LLP is required to get its accounts audited by a Chartered
Accountant if its annual turnover or the contribution exceeds the prescribed benchmark (i.e. annual
turnover ≥ Rs 60 lakhs or the contribution ≥ 25 lakhs.
• Taxation of LLP- The LLP Act, 2008 does not contain the tax provisions with regard to the LLPs. The
Income Tax Act, 1961, has been amended by the successive Finance Acts to provide for tax framework
of LLPs. Accordingly, LLP shall be treated at par with the general partnership. However, it shall be liable
to alternate minimum tax (AMT) @ 18.5% on adjusted total income. It shall not be liable for Dividend
Distribution Tax (DDT).
• Winding up of LLP – The LLP can be wound up either by the Tribunal or under Insolvency and
Bankruptcy Code, 2016. In order to ensure smooth dissolution, a liquidator is appointed who realizes
the assets, pays off the liabilities and distributes the surplus left(if any) amongst the partners .
SALIENT FEATURES OF LLP
• Conversion into LLP – A partnership firm, a private limited company or an
unlisted public company can get converted into an LLP in accordance with the
provisions of the Act and the relevant schedules attached thereto. In such cases,
the earlier entity is deemed to be dissolved and the LLP comes into existence
with a new name. Further, all the existing agreements, contracts, pending legal
cases, awards etc.of the converting entity are deemed to continue in the hands of
the LLP.
• Need based application of Companies Act. – The Central Government has been
given the authority to make applicable, by a notification, any provision of the
Companies Act to LLPs with or without suitable modification, adaptations or
changes as deemed necessary
• Non-applicability of the Partnership Act, 1932 – The Indian Partnership Act,
1932, shall not applicable to LLPs.
LLP vs Traditional Partnership vs Limited Company
BASIS PARTNERSHIP FIRM LIMITED LIABILITY LIMITED LIABILITY COMPANY
PARTNERSHIP
Regulatory Act The Indian Partnership Act, 1932 The Limited Liability Partnership Act, The Companies Act,2013
2008
Registration Voluntary. Mandatory. Mandatory.

Name Partners can choose any name for Name of LLP to contain the word Name of the public company and p
their firm Limited Liability Partnership or LLP company must end with words “Lim
as suffix. and “Pvt Ltd” respectively.
Body Corporate It is not a body corporate. It is a body corporate. It is a body corporate.

Creation Process It is created by an agreement It is created by a legal process called It is created by a legal process calle
between the partners registration/incorporation under the registration / incorporation involv
LLP Act, 2008. no. of formalities under Companies
Act,2013
Separate Legal Entity It has no legal identity distinct It has a legal identity distinct from It has a legal identity distinct fr
from its partners its partners members
Perpetual Existence It does not have perpetual It has perpetual existence and is not It has perpetual existence and
existence. The death, insanity, affected by the death, insanity, affected by the death, in
retirement or insolvency of the retirement or insolvency of its retirement or insolvency of its mem
partners may affect its continuity. partners.
Common seal Not required May have a common seal if LLP May have a common seal, if it dec
decides for it. have one
Liability of partners or Unlimited and can extend up to Liability is limited up to the extent of Liability is limited up to the a
LLP vs Traditional Partnership vs Limited Company
BASIS
Number of members
PARTNERSHIP FIRM
Minimum – 2
LIMITED LIABILITY PARTNERSHIP
Minimum – 2
LIMITED LIABILITY COMPANY
Public limited Company :
Maximum – 50 Maximum – no limit is prescribed Min – 7 ; Max – no limit
Private Limited Company :
Min – 2 ;Max – 200
Basis of mutual rights and Partnersheep Deed LLP Agreement Articles of Association and
duties Memorandum of association.
Agency relationship Every partner acts as There is no mutual agency among the No mutual agency . Directors can
agent of the firm as well partners inter se. Each partner acts as act as agent of the company but
as of other partners an agent of the LLP but not of the other not of the members of the
partners company.
Whistle Blowers No such provision exists. Protection is provided to the whistle Provision of vigil mechanism
blowers under section 31 of LLP Act provided in Companies Act,2013 is
similar to whistle blowing
provision under LLP.
Legal Compliances All partners are liable for Only designated partners are Board is responsible for all the
legal compliances and responsible for all the compliances and compliances/penalties under the
penalties under the Act penalties under the Act. Minimum 2 Act. Minimum 2 directors needed
designated partners needed in an LLP in a private company and
minimum 3 directors in a public
company.
Transfer of interest A partner can transfer A partner can transfer his interest A member of public limited can
his interest only with the subject to the provisions of LLP transfer his interest freely without
consent of all other agreement. any restriction. However, in a
partners. private limited company, there are
some restrictions.
LLP vs Traditional Partnership vs Limited Company
BASIS PARTNERSHIP FIRM LIMITED LIABILITY LIMITED LIABILITY
PARTNERSHIP COMPANY
Nature of business Business of the partnership firm must It can be formed for only economic/profit It can be created for profit or
be for profit purposes . purposes and not for charitable purposes. charitable purposes.

Management of business The business of partnership is The business of LLP is managed by the The affairs of the company are
managed by all the partners or any of partners including the designated partners managed by the Board of Directors
them acting for all the partners. authorized by the agreement elected by the shareholders.
Mode of maintenance of books of The Indian Partnership Act 1932 is The LLP Act says that the books of account It is mandatory for a company to
accounts silent on the mode of maintenance of shall be maintained on cash or accrual maintain its books of account on
accounts. basis. accrual basis.
Annual filings No return/ statement is to be filed LLP is required to file with ROC the A company is required to file
with Registrar of Firms. following: number of statements with ROC.
1. Annual Statement of Accounts &
Solvency
2. Annual Return
Audit of Accounts Audit required only if annual turnover Audit required only if annual turnover Compulsory irrespective of turnover
of the firm exceeds 1 crore. exceeds 60 lakhs or contribution exceeds or capital.
25 lakhs.

Taxability It is taxed @ 30% + surcharge+ It is taxed @ 30% + surcharge+ cess. It is taxed @ 30% + surcharge+
cess. AMT and DDT is not applicable AMT is applicable but DDT is not applicable cess. AMT as well DDT is applicable
to a partnership firm. to LLP. to a company
Winding up A Partnership firm can be dissolved The winding up of LLP may be either by The winding up of companies may
without much legal formalities. It can the NCLT or may be under Insolvency and be either by the NCLT or may be
be dissolved by will or gets dissolved Bankruptcy Code, 2016 under Insolvency and Bankruptcy
on death , insolvency of partners etc. Code, 2016
INCORPORATION PROCESS OF LLP
• Two or more persons who intend to carry a lawful business with a view to make profit can come together to associate as an
LLP. A minimum of two persons need to be selected as designated partners ,to carry out all legal and procedural compliances
,of which atleast one should be resident in India i.e. stayed in India for ≥ 182 days during the immediately preceding one year.
• To begin with, these persons should choose a desirable name for the LLP and find out its availability using free search facility
available on MCA portal
• Then application for the reservation of the proposed name shall be made through web-service RUN-LLP (which stands for
Reserve Unique Name for LLP). Maximum two proposed names, in preference order, can be suggested in it which may be
approved or rejected by the registrar. Incase of rejection of both the names, the registrar allows 15 days for resubmission of
two more names. Once the name is approved, it is reserved for a period of next 90 days and should be filled in as the name of
the proposed LLP while applying for the incorporation of the LLP.
• Form FiLLiP( Form for Incorporating Limited Liability Partnership) is the form to be used for incorporating an LLP. This is an
integrated form i.e. application for incorporation of LLP, application for allotment of DPIN(Designated Partner Identification
Number) and application for reservation of the proposed name of LLP can all be made together in the same form. But
remember DPIN/DIN application for only two designated partners can be made in the FiLLiP. If there are more than 2
designated partners who do not have DPIN, they can be added later after obtaining their DPIN separately after incorporation.
Also application for reservation of name of LLP can be made through FiLLiP if not already made through web-service RUN. But
in this case ,only one proposed name is allowed.
• This FiLLiP form comprises of Incorporation Document in Part A and Subscribers Statement in Part B. The Incorporation
Document shall contain correct information about the Name of LLP, its proposed business, its registered office address, the
details of partners and designated parters and other relevant information. It is a public document and open to inspection on
payment of prescribed fee. Part B of the FiLLiP form contains Subscribers Statement which contains the consent of persons to
act as partners or designated partners and is attested by them through the Digital Signatures and also certified by the
practising professional(CA/CS/CWA) that all the procedural and legal requirements of incorporation have been complied with.
INCORPORATION PROCESS OF LLP
• FiLLiP Form will then be filed with the Registrar having jurisdiction over the state in which the registered office of the LLP is to
be situated along with the prescribed fees and Proof of address of registered office etc. LLP Agreement can be filed later after
incorporation but within 30 days .
• The FiLLiP form will be processed by the Registrar.If there are deficiencies in the form, he shall intimate the applicant and
allow him to remove the defects and resubmit the form within 15 days from the date of intimation. If on resubmission also, it
is found that form is defective or incomplete, he shall give one more final opportunity to remove such deficiencies. The total
period for resubmission of documents shall not exceed 30 days.
• But if the Registrar on examination, finds everything in order, he will approve the registration and issue Certificate of
Incorporation in Form 16. The COI will contain the name of the LLP, the date of its incorporation, the Limited Liability
Identification Number (LLPIN) . The COI shall be conclusive evidence that the LLP has been duly registered.
• On obtaining COI, LLP becomes a body corporate, having separate legal entity and perpetual succession and will be able to
 sue and be sued in its own name
 acquire, own, hold, sell etc. property in its own name
 have a common seal , if it decides to have it
 do such things and acts as other bodies corporate may lawfully do.
• LLP Agreement- It lays down the mutual rights and duties of the partners and their rights and duties vis-a- vis LLP. It is not
mandatory to enter into a formal LLP Agreement but is always desirable to have it to avoid disputes in future. Where no LLP
Agreement is executed or when it is there but silent on certain issues, then First Schedule of the LLP Act,2008 shall apply. The
LLP Agreement and any changes therein must be filed with the Registrar within 30 days of incorporation or the date of change.
The LLP Agreement is not open to public inspection. LLP Agreement contains clauses on name and addresses of LLP, Partners ,
Designated Partners; form of contribution; profit sharing ratio; remuneration of partners; interest on contributions; rights &
duties of partners on admission, resignation, retirement, cessation, expulsion etc .
Name of the LLP and Change of Name of LLP
PROVISIONS RELATING TO NAME OF LLP PROVISIONS RELATING TO CHANGE IN NAME OF LLP
• Every LLP shall have the words ‘limited liability • When it voluntarily wants to change its name. For this the LLP
partnership’ or acronym ‘LLP’ as last words of its name should follow the procedure provided in the LLP Agreement and
• The name chosen must not resemble or be identical to if it is silent, then by obtaining consent of all its partners.
name of any other existing firm/ company/ trademark • As per the direction of the Central Govt- If through inadvertence
• The name chosen must not be undesirable in the or otherwise, an LLP got registered by a name which the CG
opinion of the Central Government eg. opines, is undesirable/ is identical/similar to the name of some
 Name should not contain words prohibited under other existing LLP, corporate, the CG may issue direction to such
Emblems and Names Act, 1950 eg. name LLP to change its name within 3 months of the date of direction.
suggesting patronage of govt. /UNO / WHO etc. • On the direction of the Registrar- An entity already having a
 Name should not contain approval based words name identical/similar to that of a subsequently formed LLP may
like mutual fund, stock exchange ,bank as these apply to the Registrar to give direction to that LLP to change its
words can be used only when required approval name. Such application can be submitted by the entity within 24
from concerned authority has been obtained. months of incorporation of the subsequently formed LLP. Then
• Incase any person improperly uses the words ‘limited Registrar will take necessary action and the LLP needs to change
liability partnership’ or LLP without being incorporated its name within prescribed timelimit
as LLP, he shall be subject to prescribed penalty . • Failure to comply with above directions u/s 17 will attaract
• Every LLP is required to publish on its invoices, official penalty .Fine between Rs. 10000- 500,000 can be imposed on LLP
correspondences , publications etc. its name as well as and between Rs.10000 – 100000 on Designated partners
its registered address, registration number and a • The notice of change of name must be filed with the Registrar
statement that it is registered with limited liability. within 30 days of date of change/compliance. The Registrar will
then issue a fresh COI bearing the new name.
REGISTERED OFFICE OF LLP AND CHANGE THEREIN
PROVISIONS RELATED TO PROVISIONS RELATING TO CHANGE THEREIN
REGISTERED OFFICE OF LLP
• Every LLP shall have a registered office • Change of registered office from one place to another within same State-
(RO) to which all communications and  follow the procedure provided in LLP Agreement or obtain the consent of all partners , if LLP
notices may be sent. Agreement is silent.
• The LLP may, in addition to the RO • Change of RO within same State from jurisdiction of one ROC to another -
address, declare any other address as  follow the procedure provided in LLP Agreement or obtain the consent of all partners , if LLP
its address for service of documents in Agreement is silent.
the manner as laid down in the LLP  LLP shall file notice of change (Form 15) with the Registrar from where the LLP is shifting
agreement or otherwise with the and a copy thereof must also be filed to the new Registrar for his information. This situation
consent of all the partners. can happen in Maharashtra and Tamil Nadu where there are 2 Registrars each .
• A document may be served on the • Change of RO from one State to another State-
LLP/ partner/designated partner by  follow the procedure provided in LLP Agreement or obtain the consent of all partners , if LLP
sending by post/registered post/ Agreement is silent.
courier/ e transmission etc.  obtain consent of secured creditors
• Proof of address of registered office  publish a public notice about the proposed change in 2 newspapers ,one in English and one
has to be submitted at the time of in local language ,21 days before filing notice of change
incorporation of the company.  file notice of change (Form 15) with the Registrar from where the LLP is shifting and a copy
thereof must also be filed to the new Registrar
• An LLP shall file notice of the change in Registered Office with the Registrar in prescribed form (
Form 15) within 30 days of complying with the procedural requirements and after paying
requisite fees. The change shall take take effect only after such filing.
LLP : PARTNERS AND THEIR RELATIONS
• As per Section 5, any individual or body corporate may be partner in an LLP
WHO CAN BE A PARTNER IN AN LLP WHO CANNOT BE A PARTNER IN AN LLP
• Individual • Individual who is found to be of unsound mind by a Court
• Company –Indian or Foreign • Individual who is an undischarged insolvent
• LLP- Indian or Foreign • Individual who has applied to be adjudged insolvent

• Every LLP shall have atleast 2 partners. There is no maximum limit of partners .
• If at any time the number of partners of an LLP is reduced to one and such LLP carries on
business with such sole partner for more than 6 months, then such sole partner, if he has
knowledge of such a situation, shall be liable personally for payment of the whole debts of the
LLP contracted during that period.
• A person can become a partner in LLP
 By Subscription i.e. by subscribing his name to the Incorporation Document on incorporation of an LLP
 By Agreement i.e. subsequent to incorporation, new partners can be admitted in LLP as per the conditions
and requirements of the LLP Agreement
• Every partner shall inform the LLP of any change in his name or address with 15 days of such
change. The LLP, in turn, would be required to file such details with the Registrar within 30 days
of such change. Similarly, whenever any person becomes or ceases to be a partner, the LLP
shall be required to intimate the Registrar about it by filing a notice with him within 30 days.
This way the Registrar would have up to date information with him.
Cessation of Partnership Interest
• A person may cease to be a partner in accordance with the agreement with other partners or
by giving not less than 30 days notice to the other partners, if there is no such agreement. Such
a partner is referred to as a former partner.
• A person shall also cease to be partner in the following cases
 on his death or dissolution of the LLP
 on being declared by a Court to be of unsound mind
 on being declared an insolvent
 if he has applied to be adjudged insolvent
• Effect of cessation of Partnership interest
 the former partner continues to be regarded as a partner of LLP in relation to any person dealing with the
LLP unless that person has notice that the former partner has ceased to be a partner of LLP or a notice of
aforesaid fact has been delivered to the Registrar
 the former partner shall continue to be liable to the LLP/ other partners/ any other person for those
obligations which he incurred during his partnership.
 the former partner or a person entitled to his share incase of death or insolvency, shall be entitled to receive
from the LLP an amount equal to his capital contribution +his share of accumulated profits after deduction of
its losses.
 the former partner or a person entitled to his share incase of death or insolvency, shall not have any right to
interfere in the management of the LLP.
 whenever any person becomes or ceases to be a partner, the LLP shall be required to intimate the Registrar
about it by filing a notice with him within 30 days.
Designated Partners
• Every LLP is required to have ‘designated partners’ who shall be accountable for regulatory and legal compliances
of the LLP. Thus they shall be
 responsible for doing all such things and acts as are required for compliance of various provisions of the Act
like filing of prescribed documents, returns, statements, reports etc
 liable to all penalties imposed on the LLP for the contravention of any of the provisions of the Act and LLP
Agreement
• The designated partners should be atleast two in number out of which atleast one should be resident in India i.e.
his stay in India during the immediately preceding one year should have been for 182 days or more . If at any time
, there is only one designated partner, each partner shall be deemed to be a designated partner.
• Designated partners must necessarily be individuals. Where body corporates are partners in LLP, their nominees
who are individuals can act as designated partners.
• Every designated partner would be required to have a DPIN . If such person already possesses a DIN (Director
Identification Number), that will be sufficient. DPIN ( Designated Partners Identification Number) is a unique
identification number valid for lifetime, allotted by Central Govt . to individuals intending to be appointed as
designated partners and to enable Govt. keep track of people who run the LLPs. To obtain a DPIN, the individual
must make an application electronically, provide the required information and fulfill the prescribed conditions and
procedures. Those who intend to become designated partners of a newly incorporated LLP can now apply for
DPIN through form FiLLiP itself.
• Prior consent to be intimated and Particulars of designated partners to be filed- A partner shall intimate to the
LLP, his consent to become a designated partner. Thereafter , the LLP shall file with the Registrar the particulars of
every designated partner, who has so consented, in prescribed form within 30 days of the appointment.
Appointment of Designated partners
• Any partner may become or cease to be designated partner in accordance with the LLP
Agreement.
• Where designated partners have been named in the Incorporation Document, they
shall be regarded as designated partners on incorporation.
• If the Incorporation document states that each of the partners, from time to time, is to
be designated partner, then every partner of the LLP shall be a designated partner.
Eligibility Conditions For Appointment Of Designated Partners ( RULE 9 OF LLP
RULES,2009)- A person is not eligible to be appointed as designated partner if
• in the preceding 5 years, he has been adjudged insolvent or
• in the preceding 5 years, he has suspended payment to his creditors or had made
composition with them
• he has been convicted by a Court for any offence involving moral turpitude and
sentenced to imprisonment of 6 months or more
• he has been convicted by a Court for an offence involving Section 30 of the Act i.e.
fraud
LIABILITY OF LLP (EXTENT AND LIMIT)
• Since LLP is a separate legal entity, the obligation of the LLP whether contractual or
otherwise, shall solely be its own obligation. So, the liabilities of LLP shall be met out of
the properties of LLP.
• An LLP will be liable towards third parties for all those acts of its partners which fall
within the scope of their actual and implied authority. LLP shall also be bound by those
unauthorised acts of the partner which he did in an emergency situation to protect the
LLP from loss or those which have been ratified by the LLP .
• The LLP is not bound by an act of a partner , if the partner has no authority to act for
the LLP .
• Where ,by the wrongful act or omission of a partner acting in the ordinary course of
business of a LLP ,or with its authority, any loss or injury is caused to any third party, or
any penalty is incurred, the LLP will be liable to the same extent as the partner.
• Where a LLP or any partner or designated partner or employee has conducted the
affairs of the LLP in a fraudulent manner, then apart from criminal proceedings, each of
the above mentioned shall be liable to compensate the person who has suffered any
loss due to such conduct. But, the LLP shall not be liable if such partner/ designated
partner/ employee has acted fraudulently without the knowledge of LLP.
LIABILITY OF PARTNERS (LIMIT AND EXTENT)
• Every partner of an LLP, who is authorized to conduct its business, will be an agent of
the LLP and not of other partners.
• Such a partner can make the LLP liable towards third parties only if he acts within the
scope of his express or implied authority or authority in emergency
• So the extent of a partners authority depends on his
Express authority i.e. authority granted under an agreement of all partners to do certain acts on
behalf of the LLP.
Implied authority i.e. such acts done by a partner which are incidental or usually done in the
ordinary course of business and such authority is presumed to be with the partner eg. buying
goods/selling goods/ contracting debts/ paying debts/drawing cheques/pledging goods/ employing
servants on behalf of the LLP.
Authority in emergency –i.e. authority to do all such acts in an emergency situation , to protect the
LLP from a loss ,as would be done by a person of ordinary prudence.
• A partner can also make the LLP liable for his unauthorised acts provided these have
been validly ratified by the LLP. Incase the LLP disowns them or does not ratify, then the
partner will be personally liable on it.
• Since limited liability is a basic feature of an LLP, a partner is not personally liable ,
directly or indirectly, for an obligation of an LLP. The liability of partners of an LLP will be
limited only to the extent of their investment in the LLP.
LIABILITY OF PARTNERS (LIMIT AND EXTENT)
• Deceased partners liability -Incase a partner dies but the business of LLP keeps continuing,
then his legal representatives or his estate will not be liable for any act of LLP done after his
death. The deceased partner is liable only for liabilities undertaken during his lifetime.
• Liability incase of holding out- If a person represents to the outside world, through his words,
conduct or behavior that he is a partner in a certain LLP, though actually he is not, then he will
be estopped from denying his being a partner, and is liable as a partner in that LLP, to all those
who have relied on that representation and have granted credit to that LLP.
• Personal Liability of a partner arises in the following situations-
 acts undertaken by a partner beyond his authority, which are not ratified by the LLP. But he not be liable for
any other partners’ unauthorised /wrongful act or omission.
 when no. of partners in an LLP fall below 2 and the sole partner carries on LLP business for more than 6
months , he will be personally liable for all debts incurred during that period.
• Unlimited Liability incase of fraud (sec.30)- The liability of a partner who has acted with intent
to defraud creditor or for any fraudulent purposes shall be unlimited and he will also be liable
to a fine ranging from Rs.50,000 to 5 lakh + imprisonment ≤ 2 years
• Liability for Compensation- Where aLLP/any partner/ employee has conducted affairs of LLP in
a fraudulent manner, then apart from criminal action against him under any law, each of the
above shall be liable to compensate the person who has suffered any loss/damage because of
such conduct.
TAXATION OF LLPs
• The Limited Liability Partnership Act, 2008 does not contain any provisions
regarding tax regime of an LLP. The Income Tax Act, 1961 as amended by the
Finance Act, 2009, introduced the tax provisions regarding an LLP.
• The Finance Act, 2009 has amended the various definitions of the Act. It included
LLP firm in the definition of a firm, LLP partners in the definition of partners and
an LLP in the partnership definition.
• LLP is treated at par with general partnerships firms for the purpose of taxation.
For an LLP to be assessed as firm the following conditions are to be satisfied-
LLP must be evidenced by a written LLP Agreement
LLP Agreement must clearly specify individual shares of partners
A certified copy of LLP Agreement must accompany the Return of Income of LLP
A certified copy of revised LLP Agreement must accompany the Return of Income whenever
there is any change in the constitution of LLP or profit sharing ratio of partners
There should be no failure on part of the LLP while attending to the notices given by
Income Tax Officer for completion of the assessment of the LLP
Taxation Scheme
• Profits of the LLP firm will be taxed in the hands of the the LLP and not in the hands of the partners. For
assessment year 2020-21, income of LLP shall be taxed @ 30% plus Health and Education Cess @ 4% (i.e
effective rate of tax for LLP is 31.2%).
• LLP is liable to pay Alternate Minimum Tax (AMT) @ 18.5% plus 4% Health and Education Cess on Adjusted
Total Income provided income tax according to normal provisions of Income Tax Act is less than AMT. Adjusted
Total Income is computed by adding back number of deductions claimed to the net income of LLP.
• Surcharge is 12% of income tax if net income exceeds Rs. 1 crore. In case surcharge is levied ,Health and
Education Cess @ 4%, is levied on the amount of ( IncomeTax + Surcharge).
• Share of profit received by partners from firm is exempt in their hands. But, remuneration , if any provided by
the agreement ( i.e. salary, bonus, commission) to partners will be taxed as Income from Business and Profession
in their hands.
• LLP is not liable for Dividend Distribution Tax.
• LLP shall not be eligible for Presumptive Taxation Scheme. ( Scheme wherein the small taxpayers can pay tax at a
prescribed presumed rate and get relieved from the botheration of maintainance of books of accounts)
• LLP has to file an income tax return ITR- 5.It shall be signed and verified by a designated partner .
• Due date for filing income tax return by LLP is July 31( in case accounts are not required to be audited) or
September 30 (in case accounts are required to be audited).
• No capital gain arise on conversion of partnership firm ,private company or unlisted company into LLP, provided
prescribed conditions are complied with.
• Every partner of LLP shall be jointly and severally liable for the payment of any tax due from the LLP in liquidation
for the period during which he was a partner.
CONVERSION TO LLP
The LLP concept was conceived to reap the benefits of both the partnership
structure as well as the company form of organisation. In order to enable the
existing firms and companies to take advantage of this new model, the LLP Act
contains enabling provisions , whereby a firm, a private company or an unlisted
public company would be able to convert themselves into LLPs as a going concern.
Heading Conversion from Firm to LLP Conversion from Private Conversion from Unlisted
Company into LLP Public Company into LLP
Applicable Sections and A traditional partnership firm A private company incorporated A unlisted public company
Schedules registered under Indian under Companies Act , is allowed to incorporated under Companies
Partnership Act 1932 or not, is convert into an LLP under section 56 Act , is allowed to convert into
allowed to convert into an LLP of the LLP Act and as per the an LLP under section 57 of the
under section 55 of the LLP Act provisions of third schedule of the LLP Act and as per the
and as per the provisions of second LLP Act. provisions of fourth schedule of
schedule of the LLP Act. the LLP Act.
Meaning The conversion of the firm into an The conversion of the private The conversion of the unlisted
LLP means a transfer of the company into an LLP means a public company into an LLP
property, assets, interests, rights, transfer of the property, assets, means a transfer of the
privileges, liabilities, obligations interests, rights, privileges, property, assets, interests,
and the undertaking of the firm to liabilities, obligations and the rights, privileges, liabilities,
the LLP as a going concern. undertaking of the private company obligations and the undertaking
to the LLP as a going concern. of the unlisted public company
CONVERSION TO LLP
Heading Conversion from Firm to LLP Conversion from Private Company Conversion from Unlisted Public
into LLP Company into LLP
Eligibility for A firm may apply to convert into an A private company may apply to convert An unlisted pubic company may
conversion into an LLP provided apply to convert into an LLP provided
LLP provided the partners of the
i)There is no security interest in its i)There is no security interest in its
LLP into which it converts assets subsisting at the time of assets subsisting at the time of
comprises all the partners of the application and application and
firm and no one else. ii)The partners of the LLP to which it ii)The partners of the LLP to which it
converts comprises all the shareholders converts comprises all the
of the company and no one else. shareholders of the company and no
one else.

Preparatory 1. To decide about the designated 1. To decide about the designated 1. To decide about the designated
steps partners. partners. partners.
2. Obtain the DPIN and digital 2. Obtain the DPIN and digital 2. Obtain the DPIN and digital
signatures of designated signatures of designated partners. signatures of designated partners.
partners. 3. To ascertain the availability of the 3. To ascertain the availability of the
3. To ascertain the availability of proposed name of LLP and fill Form proposed name of LLP and fill
the proposed name of LLP and fill RUN-LLP through web service. Form RUN-LLP through web
Form RUN-LLP through web 4. To get LLP agreement and service.
service. incorporation documents drafted. 4. To get LLP agreement and
4. To get LLP agreement and incorporation documents drafted.
Incorporation documents
drafted.
Heading Conversion from Firm to LLP Conversion from Private Company Conversion from Unlisted Public
CONVERSION TO LLP into LLP Company into LLP
Filing of To make an online application for To make an online application for To make an online application for
Conversion conversion in e-form 17 along with conversion in e-form 18 along with conversion in e-form 18 along with
Application requisite fees. The Form has parts- requisite fees. The Form has parts- requisite fees. The Form has parts-
along with Part A requires general information Part A requires general information Part A requires general information
Statements, like-Name of the partnership firm, its like-Name of the private company, its like-Name of the unlisted public co.
attachments Registration number and Date of Corporate Identity Number (CIN) and its Corporate Identity Number (CIN)
and registration, if registered Date of its registration and Date of its registration
Certificates Part B consists of a Statement by Part B consists of a Statement by its Part B consists of a Statement by its
all its partners that all the shareholders that all the requirements shareholders that all the
requirements under this Act and rules under this Act and rules on conversion requirements under this Act and rules
on conversion have been complied have been complied with. on conversion have been complied
with. Attachments with the Form with.
Attachments with the Form  Statement of shareholders’ consent Attachments with the Form
 Statement of consent of partners  Certified Statement of the assets  Statement of shareholders’ consent
 Certified Statement of the assets and liabilities of the company  Certified Statement of the assets
and liabilities of the firm  List of all creditors along with their and liabilities of the company
 List of all creditors along with consent to the conversion.  List of all creditors along with their
their consent to the conversion.  Clearances/approvals/permissions consent to the conversion.
 Clearances/approvals/permissions from the concerned authorities  Clearances/approvals/permissions
from the concerned authorities  Other attachments like Income Tax from the concerned authorities
 Other attachments like Income Returns, particulars of pending  Other attachments like Income Tax
Tax Returns, particulars of cases etc. Returns, particulars of pending
pending cases etc. Certificate-The e- Form shall be cases etc.
Certificate-The e- Form shall be digitally signed by the designated Certificate-The e- Form shall be
digitally signed by the designated partner and shall be certified by a digitally signed by the designated
partner and shall be certified by a practicing CA/CS/CWA after partner and shall be certified by a
CONVERSION TO LLP
Heading Conversion from Firm to LLP Conversion from Private Conversion from Unlisted
Company into LLP Public Company into LLP
Registration of The registrar scrutinizes the above The registrar scrutinizes the above The registrar scrutinizes the
documents documents and if he finds them in documents and if he finds them in above documents and if he finds
order, he will register them and order, he will register them and them in order, he will register
issue Certificate of Registration issue Certificate of Registration them and issue Certificate of
in form 19 bearing the name and in form 19 bearing the name and Registration in form 19
date of registration of LLP. date of registration of LLP. However, bearing the name and date of
However, if finds any discrepancy if finds any discrepancy or is registration of LLP. However, if
or is dissatisfied with the dissatisfied with the particulars of finds any discrepancy or is
particulars of information information furnished, he can refuse dissatisfied with the particulars
furnished, he can refuse the the conversion. The applicant private of information furnished, he can
conversion. The applicant firm can company can file an appeal to the refuse the conversion. The
file an appeal to the Tribunal Tribunal against such refusal by RoC. applicant unlisted public
against such refusal by RoC. company can file an appeal to
the Tribunal against such refusal
by RoC.

Intimation to Registrar The LLP shall, within 15 days of its The LLP shall, within 15 days of its The LLP shall, within 15 days of
registration, inform the concerned registration, inform the concerned its registration, inform the
Registrar of Firms with which it Registrar of Companies (RoC) with concerned Registrar of
was registered, about the which it was registered, about the Companies (RoC) with which it
conversion and about the conversion and about the particulars was registered, about the
particulars of LLP. of LLP. conversion and about the
CONVERSION TO LLP
Heading Conversion from Firm to LLP Conversion from Private Conversion from Unlisted
Company into LLP Public Company into LLP
Effect of Registration i)An LLP comes into existence i)An LLP comes into existence i)An LLP comes into
by the name specified in the by the name specified in the existence by the name
Certificate of Registration. Certificate of Registration. specified in the Certificate
ii) All tangible as well as ii) All tangible as well as of Registration.
intangible property , assets, intangible property , assets, ii) All tangible as well as
interests, rights, privileges, interests, rights, privileges, intangible property , assets,
liabilities, obligations and the liabilities, obligations and the interests, rights, privileges,
whole of the undertaking of whole of the undertaking of the liabilities, obligations and
the firm shall be transferred to company shall be transferred the whole of the
and vest in the LLP. to and vest in the LLP. undertaking of the company
iii) The firm shall be deemed iii) The company shall be shall be transferred to and
to be dissolved and removed deemed to be dissolved and vest in the LLP.
from the records of the removed from the records of iii) The company shall be
Registrar of Firms. the Registrar of Companies deemed to be dissolved and
(RoC). removed from the records
of the Registrar of
Companies (RoC).
CONVERSION TO LLP
Heading Conversion from Firm to LLP Conversion from Private Conversion from Unlisted
Company into LLP Public Company into LLP
Other consequence All the pending proceedings, All the pending proceedings, existing All the pending proceedings,
existing agreements, contracts, agreements, contracts, existing agreements, contracts,
arrangements, approvals , permits, arrangements, approvals , permits, arrangements, approvals ,
licenses etc relating to the firm licenses etc relating to the company permits, licenses etc relating to
shall continue in the name of the shall continue in the name of the LLP the company shall continue in
LLP and shall be enforceable by or and shall be enforceable by or the name of the LLP and shall
against the LLP instead of the firm. against the LLP instead of the be enforceable by or against the
company. LLP instead of the company.

Notice of conversion in The LLP shall ensure that for a The LLP shall ensure that for a The LLP shall ensure that for a
correspondences period of 12 months, its every period of 12 months ,its every period of 12 months , its every
official correspondence shall bear official correspondence shall bear official correspondence shall
(i) the statement that it was (i) the statement that it was bear
converted from a firm into an LLP converted from a private company (i) the statement that it was
(ii) the name and registration into an LLP and converted from a unlisted public
number, if applicable, of the firm (ii) the name and registration company into an LLP and
from which it was converted. number of the company from which (ii) the name and registration
it was converted. number of the company from
which it was converted.
Winding up of LLPs
An LLP is an artificial person created by law through the process of incorporation..
Therefore, its life can be ended ,through a legal process only called winding up or
liquidation. The process of winding up involves realisation of assets, payment of
liabilities and distribution of surplus,if any, amongst the partners of the LLP.
Winding is not same as dissolution.
WINDING UP DISSOLUTION

Winding up involves realisation of assets, payment of liabilities and Dissolution involves striking off the name of LLP from the Register of
distribution of surplus amongst the partners of the LLP LLPs and notifying this fact in the Official Gazette.
Winding up precedes dissolution Dissolution follows winding up .

Winding up is a process Dissolution is its end result

After winding up and before dissolution, the legal entity of the LLP The LLP loses its legal entity after dissolution
remains.
The LLP maybe allowed to do business so far as its required for The LLP is no more in existence so there is no question of doing any
beneficial winding up business
Modes of Winding up(Sec.63)
Following are the modes of winding up the LLP -
I. Winding up by the Tribunal u\s 64 of the LLP Act
II. Insolvency Resolution and Liquidation under Insolvency and Bankruptcy Code,
2016.
III. Voluntary Liquidation u\s 59 of Insolvency and Bankruptcy Code, 2016
 Winding up by the Tribunal under the LLP Act
Grounds for winding up by the Tribunal ( Sec.64)
• Special Resolution- The LLP can , by a resolution passed by three-fourths of total number of its
partners, decide that it be wound up by the Tribunal. However, the power of Tribunal in this case is
discretionary and may not be exercised if the Tribunal finds that the winding up would be opposed to
public interest or LLP's interest.
• Number of partners below Statutory minimum-If for a period of more than 6 months, the number of
partners of an LLP is reduced below 2, the Tribunal is bound to make a winding up order.
• Acting against national interest- An LLP may be ordered to be wound up if it had acted against the
interests of the sovereignty and integrity of India, the security of the State or public order.
• Default in filing the Statement of Account and Solvency or Annual Return- If the LLP has defaulted in
filing with ROC its Statement of Account and Solvency or Annual Return for any 5 consecutive financial
years, it can be wound up by the Tribunal
• Just and Equitable- The Tribunal may order for winding up of an LLP if it is of the opinion that it is just
and equitable . The Tribunal enjoys wide discretionary power under this clause and gives due weightage
to the interest of the LLP, its employees, creditors, partners, public etc while considering this ground. On
the basis of earlier judicial pronouncements, the following are few examples in this head –
 Loss of substratum- eg. LLP has failed to achieve its main object
 Deadlock in management- applicable when partners are not on speaking terms/are bitterly hostile to each other
 Illegal object - when LLP was conceived to carryout illegal business eg. if main object is to conduct lottery
 Losses -eg. where business cannot be carried except at a loss/ no reasonable hope of trading at a profit in the
business
 Bubble LLP -eg LLP does not carry any business/ does not own any assets or property
Petition for Winding up
Petition for winding up- The application to the Tribunal for winding up is called a petition. This petition can be made
by any of the following-
• By the LLP or
• By any of its partner or partners or
• By the Registrar- If Statement of Accounts and Solvency, Annual returns not filed, when number of members fall
below minimum etc.
• By any person authorised by Central Government- The CG may authorise a person to file a petition for winding
up on its behalf if is found that the business of LLP is being conducted with the intent to defraud its creditors or
partners, or for a fraudulent or unlawful purposes.
• By Central\ State government-This petition is made if LLP had acted against national interest \ sovereignity\
integrity \ security of India \against public order
Powers of the Tribunal -After receiving the petition for winding up, the Tribunal will fix a date for hearing of petition
. After consideration of all the factors, it may either dismiss the petition or may make an order for winding up of the
LLP. Incase a winding up order is made, it will appoint a liquidator for carrying out the work of winding up. It will
also specify its powers, duties, and remuneration. The Liquidator is appointed by Tribunal from amongst the
insolvency professionals registered under Insolvency and Bankruptcy Code, 2016
Liquidators and their role
• The liquidator is a person who helps in completing the liquidation proceedings of the LLP i.e. in realising the assets
and distributing them among the creditors and partners in a fair manner.
• The liquidator is required to submit report on progress of winding up on a regular basis.
• When the affairs of the LLP have been completely wound up, the Liquidator shall make an application to the
Tribunal for its dissolution.
Consequences of winding up order
Winding up commences not from the date of winding up order of the Tribunal but it shall be deemed to
commence at the time of presentment of petition. The consequences of winding up order are-
• The LLP and the petitioner are required to file a certified copy of the Tribunal order with the Registrar who shall
then notify the information of winding up order in the Official Gazette
• The winding up order shall be deemed to be notice of discharge to officers and employees of the LLP.
• The powers of the Designated partners are terminated and the same to be exercised by the Liquidator
• Any debts payable at a future date, becomes immediately payable
• The winding up order shall operate in favour of all the creditors and all the partners.
• No suit or legal proceeding can be commenced against the LLP without the leave of the Tribunal. Similarly, any suit
pending on the date of winding up order cannot be proceeded with except with the permission of the Tribunal.
• The Tribunal shall have full powers to entertain or dispose of any new or pending suit by or against the LLP. Any
suit \ proceeding pending in any other court shall also be transferred to the Tribunal.
Dissolution of LLP
• When the affairs of the LLP have been completely wound up, the Liquidator shall make an application to the
Tribunal for its dissolution
.

• The Tribunal , then makes an order for dissolution of the LLP and the LLP stands dissolved from the date of such
order.
• A copy of the Dissolution order shall be filed by the Liquidator with the Registrar within 30 days of receiving it
• The Registrar will then record the same in his records and registers.
Insolvency Resolution and Liquidation under Insolvency
and Bankruptcy Code ,2016
• Insolvency and Bankruptcy Code(IBC),2016- came into operation from 2016 and seeks to consolidate the existing
framework by creating a single law for insolvency and bankruptcy in India. The Code marks a paradigm shift from
the regime of Debtor - in- Possession to Creditor- in- Control. The Code has been designed to explore revival
opportunities for an ailing entity. Only when the entity cannot be revived or its insolvency cannot be resolved,
that an entity is liquidated.
• Insolvency and Bankruptcy Board of India(IBBI)- to act as a regulator of Insolvency Professionals (IPs)and
Insolvency Professional Agencies(IPAs) and to oversee the insolvency proceedings in India.It is a 10 member Board
and includes representatives from Ministry of Finance, Ministry of Law , Ministry of Corporate Affairs, RBI etc.
• Insolvency Professionals (IPs)- play a key role in the insolvency process and manage and control the assets of the
debtor during the insolvency process .Professionals( like Advocates, CAs, Company Secretaries, Cost Accountants
having experience >= 10 years) or Graduates( having managerial experience >=15 years)) + having passed the
Insolvency Examination + registered with Insolvency Professional Agencies(IPAs), can serve as IPs. Even an LLP\
firm\ Company can be registered as an Insolvency Professional Entity(IPE) if majority of its partners\ whole time
directors are registered as IPs. These IPs act as IRPs( Interim Resolution Professionals) , RPs ( Resolution
Professionals)or Liquidators.
• Insolvency Professional Agencies(IPAs)-agency to enroll and regulate members practicing as IP. IPA is also
responsible for capacity building of IPs to ensure that they remain updated with knowledge and market
requirements. IBBI has given registration to ICAI and ICSI to function as IPAs and to act as regulators of IPs.
• National Company Law Tribunal (NCLT)- Benches of NCLT are the Adjudicating Authority for corporate insolvency
i.e. insolvency of Companies and LLP .Appeals against the order of NCLT are to be made to NCLAT ( National
Company Law Appellate Tribunal)
Insolvency Resolution Process as per Insolvency and
Bankruptcy Code, 2016
• Initiation of the Process- When any LLP commits a default in payment of a financial
debt \ operational debt of ₹1 crore or more, a financial creditor \operational creditor or
the LLP itself may initiate corporate insolvency resolution process by filing an
application in prescribed Form with the Tribunal along with prescribed fees .The date of
filing the application with Tribunal is known as Initiation Date.
financial creditor are those to whom co. owes financial debt eg. Banks, FIs
operational creditors are those whom co. owes operational debt eg. workers,suppliers
• Order of Initiation of Insolvency Process-The NCLT shall, within 14 days of filing of
application, may either accept it or reject it.If the Tribunal is satisfied that a default has
occurred and the application is complete , it shall , accept it and pass the order for
initiation of corporate insolvency resolution process. This date is referred as the
Corporate Insolvency Resolution Commencement Date.
 The corporate insolvency resolution process shall be completed within 180 days (
extendable by maximum 90 days).
Moratorium is declared which implies initiation\continuation of legal proceedings
against the company are stalled, creditors' claims are freezed and the company is
prohibited from selling, alienating or creating any encumbrance without approval from
relevant authority.
Insolvency Resolution Process as per Insolvency and
Bankruptcy Code, 2016
• Appointment of Interim Resolution Professional - The Tribunal shall appoint an interim resolution professional
within 14 days from Corporate Insolvency Resolution Commencement Date . The term of interim resolution
professional shall continue till the date of appointment of Resolution Professional. Once interim resolution
professional is appointed-
 Public announcement is made to inform public about the initiation of insolvency resolution process and for
providing details such as last date for submission of claims, penalties for false claims, date of closure of this
resolution process, details of interim resolution professionals etc.
 the powers of the Designated Partners stand suspended and are to be exercised by him. Also the management of
the affairs of co. shall vest in him .
• Formation of Committee of Creditors (CoC)- The Interim Resolution Professional shall, after collation of all the
claims received against the LLP, constitute a Committee of Creditors.
 This committee shall comprise all the financial creditors of the company. If the LLP doesn’t have financial
creditors, a committee of operational creditors is appointed.
 All decisions pertaining to revival and implementation of effective resolution plan are required to be taken by the
Committee of Creditors by majority vote of not less than 66%.
• Appointment of Resolution Professional-
 The Committee of Creditors , must be held within 7 days of its constitution, may either resolve to appoint the
Interim Resolution Professional as Resolution Professional (RP)or appoint someone else.
 The Resolution Professional , takes custody and control of all assets and business records of the LLP immediately
after appointment , maintains updated list of claims, convenes and attends all meetings of CoC, prepares
Information Memorandum, invites prospective resolution plans etc.
Insolvency Resolution Process as per Insolvency and
Bankruptcy Code, 2016
• Information Memorandum-
 Resolution Professional prepares Information Memorandum which contains financial and other relevant information for formulating
resolution plan.
 The resolution applicant prepares the Resolution Plan on the basis of Information Memorandum and submits it to the RP who then examines
it.
• Approval of Resolution Plan by Committee of Creditors
 The resolution plan ,which meets the prescibed criteria and conditions is then presented to the Committee of Creditors for approval.
 The plan, if approved by Committee of Creditors by atleast 66% majority, is submitted by the RP to the Tribunal.
• Approval of Resolution Plan by Tribunal
 If NCLT is satisfied, it shall by order approve the resolution plan which will be binding on the LLP and its employees, partners, creditors etc.
 The company will be restructured and revived as per the approved resolution plan.
• Liquidation Process- Liquidation proceedings against the LLP will be initiated by the Tribunal if
 If CoC does not approve resolution plan
 If NCLT is not satisfied with the resolution plan and rejects it on technical grounds
 Tribunal doesn't receive a resolution plan within the prescribed maximum period
 If approved resolution plan is contravened by the LLP and any person aggrieved by the contravention files an application to the Tribunal for
liquidation.
• Once the liquidation order is passed, the Tribunal may appoint RP as liquidator of the LLP who shall then take control \ custody of all assets,
realise assets, determine the claims of all creditors, pay all liabilities and distribute the surplus if any, amongst the partners of the LLP. After
that, he shall apply to Tribunal for obtaining 'Dissolution Order'. A copy of it shall be forwarded to the Registrar for his information and record
Voluntary Liquidation of Company Under IBC, 2016
Chapter V of The Insolvency and Bankruptcy Code, 2016 deals with voluntary liquidation of corporate persons
including LLPs. As per sec.59(1) of the Code, an LLP intending to liquidate itself voluntarily must follow the
conditions u\s 59(3) and meet procedural requirements of IBBI. Following is the process of voluntary liquidation-
• Initiation of liquidation proceedings- A voluntary winding up is possible only when LLP had not defaulted i.e. it is
fully solvent and its purpose is not to defraud any person. Such a LLP must file with the Registrar a ' Declaration
of Solvency' from majority of partners verified by an affidavit assuring that the LLP will be able to pay its debts
in full & that liquidation is not to defraud anyone. This declaration must be accompanied with
 Audited financial statements and records of last two years
 Valuation report of its assets prepared by registered valuer
• Partners Resolution- Within 4 weeks of Declaration of Solvency, resolution of the partners passed by special
majority - requiring the LLP to be liquidated voluntarily and appointing insolvency professionals to act as
liquidators -should be obtained . However, if LLP needs to be liquidated voluntarily as a result of expiry of the
period of its duration as fixed or on occurrence of any event provided to trigger liquidation, a resolution passed
by simple majority will be sufficient.
• Creditors Approval - Incase the LLP owes any debt to any person then, approval of winding up by creditors
representing at least two- thirds in value should also be obtained within 7 days of Partners' Resolution.
• Information to ROC and IBBI- The LLP shall notify the Registrar and the IBBI about its resolution to liquidate
within 7 days of Partner' Resolution (or the Creditors Resolution, where company owes debt)
• Liquidation Commencement Date - The liquidation proceedings shall be deemed to have commenced from the
date of passing of the Partners resolution ( or Creditors Resolution, as the case may be).The LLP shall from this
date cease to carry-on its business except as far as is necessary for beneficial winding up . The legal entity
however, shall continue to exist until it is dissolved.
Voluntary Liquidation of LLP Under IBC, 2016
• Public Announcement and Collation of Claims -Within 5 days of his appointment, the
liquidator shall make a public announcement (in an English newspaper, regional newspaper,
and on website of the LLP) calling upon all stakeholders like creditors ,employees, etc. to
submit their claims within 30 days of liquidation commencement date.
• Verification of claims-The liquidator shall verify the claims and on the basis of claims admitted,
prepare a list of stake holders.
• Realisation of Assets and Distribution of Proceeds-The liquidator shall sell, recover and realize
all assets\ moneys due to the LLP in a time bound manner. He should then distribute the
proceeds to the stakeholders.
• Completion of Liquidation-The liquidator shall endeavor to complete the liquidation process
within 12 months from the liquidation commencement date. When the liquidation process gets
fully completed ,the liquidator should prepare a Final Report and submit it to the LLP, Registrar
and IBBI . He shall make an application to NCLT for the dissolution of the LLP
• Dissolution of the company-Having received the application from the liquidator, the NCLT shall
pass an order of dissolution and the LLP shall stand dissolved from the date of NCLT's order. A
copy of the Dissolution Order shall be forwarded to the Registrar for his information and
record.