Winding up is the process, where all the assets of the business are sold to paying off creditors and distributing surplus if any, among the owners of the business. An LLP may decide to wind up its business by two modes, either by voluntarily winding up or compulsory winding up.
In voluntary winding up partners may decide between themselves to wind up the operations of the business.
In compulsory winding up an LLP may be compulsorily wound up by the order of the tribunal. There are certain circumstances for the LLP compulsory winding up. Eg. when LLP is unable to pay off its debts, where the number of partners of the limited liability partnership is reduced below two and it continues for the period of more than six months.
REASONS FOR WINDING UP BY TRIBUNAL
- LLP wants to be wind up
- There are less than two partners in LLP for a period of more than 6 months
- LLP is not in position to pay its debts
- LLP has not filed with the registrar, the statement of Accounts and solvency or annual returns of LLP for any 5 consecutive financial years.
- The Tribunal is of the option that it is just and equitable that the LLP should be wound up.