LLP Dissolution — Voluntary & NCLT

Dissolution under Section 63 of the Limited Liability Partnership Act 2008 is a winding-up process ordered by the National Company Law Tribunal (NCLT) on grounds such as just and equitable cause, inability to pay debts, or misconduct, and involves a formal liquidator and creditor settlement. Striking off under Rule 37(1) of the LLP Rules 2017 via e-Form 24 is an administrative closure available only to LLPs that are non-operational (i.e., have nil transactions for at least two consecutive financial years) and have no pending liabilities — it does not require NCLT intervention. Voluntary winding up under Section 64 of the LLP Act 2008 is available to solvent LLPs where partners pass a resolution to wind up and appoint a liquidator who files a final return. In practice, most LLPs use e-Form 24 (striking off) as it is faster and costs less, but it is ineligible if the LLP has outstanding statutory dues, pending litigation, or active creditors.

Under Section 64 of the Limited Liability Partnership Act 2008, voluntary winding up commences with a majority resolution of partners to wind up; if the LLP is solvent, a declaration of solvency signed by a majority of designated partners is filed in Form 19 within 15 days of the resolution. The partners then pass a second resolution within 14 days appointing a liquidator and fixing remuneration. The liquidator realises assets, discharges liabilities, and files Form 20 (statement of accounts and list of creditors) within 15 days of completing liquidation. A final meeting of partners is held and Form 22 (notice of final meeting) is filed with the Registrar of Companies within 15 days. The Registrar, on being satisfied, strikes off the LLP from the register, which is published in the Official Gazette under Section 75 of the LLP Act 2008.

Before dissolution, the LLP must file all pending Income Tax returns under Section 139 of the Income Tax Act 1961 (≡ §263/§349, IT Act 2025) for all financial years up to the year of closure, including a final return for the partial year of dissolution if applicable. A 'No Objection Certificate' or tax clearance is not formally required by the MCA for e-Form 24 (striking off), but the Registrar may call for proof of no pending tax demands, and an outstanding income tax demand renders the Form 24 application liable to rejection. GST registration must be cancelled under Section 29 of the CGST Act 2017 with a final return in Form GSTR-10 filed within 3 months of cancellation order. PF registration cancellation and final PF settlement must also be completed and confirmed by EPFO, and TAN surrender must be made with the jurisdictional TDS office by filing a surrender request under Section 203A of the Income Tax Act 1961.

When an LLP is dissolved and assets are distributed to partners, the distribution is treated as a transfer under Section 2(47) of the Income Tax Act 1961 for AY 2026-27 and earlier. However, Section 47(ii) exempts the distribution of capital assets by a firm/LLP to its partners on dissolution from capital gains tax in the hands of the LLP; the partner instead computes capital gains when they eventually sell the asset received, with the cost of acquisition being the LLP's book value at the time of distribution per Section 49(1). If cash distributed exceeds a partner's capital account balance, the excess may be treated as deemed income under Section 28(va) if it represents compensation for certain obligations. The dissolution itself does not attract any tax in the LLP's hands on distribution, but any asset sold by the LLP before dissolution triggers capital gains taxable in the LLP's final return.

An LLP that has defaulted on annual filing of Statement of Account and Solvency (Form 8) and Annual Return (Form 11) under Sections 34 and 35 of the LLP Act 2008 accumulates late fees at ₹100 per day per form with no cap, as confirmed under Rule 37(1A) of LLP Rules 2017 inserted in 2018. Before filing e-Form 24 for striking off, all overdue Form 8 and Form 11 returns must be filed and all late fees paid; the e-Form 24 application requires an affidavit and indemnity bond signed by all designated partners confirming NIL assets and liabilities, which is inconsistent with having unresolved ROC arrears. The Ministry of Corporate Affairs periodically announces condonation schemes for LLPs (such as the LLPsettlement scheme) that waive late fees on belated filings; checking for any live scheme before filing can significantly reduce the compliance cost of dissolution.