New Delhi: The government will soon come out with rules for winding up of limited liability partnership (LLP) firms which can be either voluntary or under orders of a tribunal.
“We have written to Parliament asking if the winding-up rules can now be notified. A response is expected soon,” a ministry of corporate affairs (MCA) official said.
The winding-up rules, which are in line with the provisions of the new Companies Bill, provide for “an easier, simpler, less time-consuming and less cumbersome procedure for wrapping up and dissolving LLPs,” the official said.
In pursuance to the requirement of the LLP Act, the government had tabled the winding-up rules in Parliament during the first week of July.
The rules, the official added, would be notified after getting the nod from Parliament.
The LLP, which is a hybrid of partnership firms and companies, provides for another mode of setting up a business. As on date, 91 firms have registered under the LLP Act, most being consultancies, trading firms and financial businesses.
The government has already notified various rules under the LLP Act, which came into force on 31 March this year.
However, the winding-up rules are yet to be notified.
“The delay is just a procedural hitch, concerns of all stakeholders are taken into account, creditors’ interest is also properly intact,” the official asserted when asked if there were any bottlenecks in the proposal on winding-up rules.
Similar to the winding-up rules applicable on public limited companies, the draft LLP (Winding up and Dissolution) Rules has procedures for winding up, either through a tribunal or voluntarily.
A company can be wound-up by a tribunal if it is unable to pay up debts or it has resolved that it would be wound-up by a tribunal. The tribunal may initiate the winding-up, if a complaint is received against the company regarding fraudulent practice.
To voluntarily wind-up a business a resolution needs to be passed by the company in its general meeting.
As per the provisions of the Companies Bill, members are liable to contribute only to the extent they have agreed upon in the agreement on winding-up .