Question 5 (b)

Winding up of an LLP and winding up by the Tribunal

9 marks

Time to write
About 18 minutes
Topic
Outside the topics the syllabus names

Question

Question 5 (b) · 9 marks

What is meant by winding up of an LLP? Discuss in what circumstances the tribunal may wind up an LLP.

Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

18 minfor 9 marks

Read from the question

  • What is meant…?Discuss…Two asks in one question: answer both.

What the paper leaves open

Winding up of an LLP is not among the topics the UGCF syllabus names for Unit 5; the question is answered as printed, from the LLP Act.

Write it in this order

  1. Read; underline the asks; jot your points 1 min
  2. 1 Meaning of winding up; voluntary or by the Tribunal (s. 63) 3 marks 5 min
  3. 2 Circumstances for winding up by the Tribunal (s. 64) 5 marks 9 min
  4. 3 Rules and conclusion 1 mark 2 min
  5. Check: every ask answered, key terms underlined 1 min

Easy marks

  • Step 1 opens with the meaning: a one-line definition, the quickest mark in it.

Short on time? Trim steps 1 and 2 evenly rather than skip one: each is capped at its own marks. End with step 3 in a line or two.

Try it first. About 18 minutes for 9 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

Meaning. Winding up closes an LLP down in an orderly way: its business is stopped, its property is turned into money, its creditors are paid, and anything left goes to those entitled to it; the LLP is then dissolved and no longer exists as a legal person. Section 63 of the LLP Act, 2008 allows two routes, a voluntary winding up or a winding up by the Tribunal, and an LLP wound up in either way may be dissolved.

Circumstances in which the Tribunal may wind up an LLP (s. 64). The grounds fall into four groups:

  1. The LLP's own choice: the LLP itself resolves that the Tribunal should wind it up.
  2. The LLP has stopped working as the law requires: it has had fewer than two partners for more than six months, or it has failed for five financial years in a row to file its Statement of Account and Solvency or its annual return with the Registrar. Example: a two-partner LLP whose second partner died a year ago and was never replaced can be wound up.
  3. Public interest: the LLP has worked against India's sovereignty and integrity, the security of the State or public order.
  4. Fairness: the Tribunal considers it just and equitable to wind the LLP up, for instance where the partners are deadlocked and the business cannot go on.

The ground that once covered an LLP unable to pay its debts, clause (c), has been omitted; insolvency is now dealt with under the Insolvency and Bankruptcy Code, 2016.

Rules (s. 65). The Central Government may make rules on the winding up and dissolution of LLPs.

Conclusion. An LLP may be wound up voluntarily or by the Tribunal; the Tribunal acts on the grounds in section 64, which run from the LLP's own decision to the just and equitable ground.

Where the 9 marks sit

#ComponentMarks
1Meaning of winding up; voluntary or by the Tribunal (s. 63)3
2Circumstances for winding up by the Tribunal (s. 64)5
3Rules and conclusion1
Total9
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