There are a few ways to start the process of liquidating an LLP, or limited liability partnership.
A winding-up petition can be filed against the company by creditors who wish to push the partnership into liquidation so they can get the money they are due.
In some cases, the partners may decide to voluntarily dissolve the company.
Additionally, partners can also dissolve the LLP by following the statutory process. In order to do this, partners must file a notice of dissolution with Companies House, and must also notify all creditors and members of the LLP.
Once the LLP has been dissolved, the partners must also file accounts and a statement of dissolution with Companies House.
How to liquidate a limited liability partnership
A Limited Liability Partnership (LLP) in the UK can be liquidated in a process known as winding up. The process of winding up is similar to that of a traditional partnership, but there are some key differences. The first step in the process is to pass a resolution among the partners to wind up the LLP. This resolution must be passed by a majority of the partners, and it must be done in accordance with the LLP agreement. Once the resolution is passed, the partners must give notice of the winding up to all creditors, employees, and any other parties that may have an interest in the LLP.
Next, a liquidator must be appointed. This person is responsible for collecting and distributing the assets of the LLP, and for settling any outstanding debts. The liquidator must be either a licensed insolvency practitioner.
Once the liquidator is appointed, they will collect all of the assets, including any cash and property, and will use these assets to pay off any outstanding debts. If there are any assets remaining after all debts have been paid, these will be distributed among the partners.
It is worth noting that there are two types of winding up process, voluntary and compulsory. Voluntary winding up is when the partners of LLP decide to wind up the company voluntarily while compulsory winding up is when outside parties such as creditors or regulators take legal steps to force the company to be wound up.
Finally, it is important to note that the partners must file paperwork with Companies House to officially dissolve the LLP. This includes filing a statement of satisfaction for any outstanding debts and a final dissolution form. Once these forms have been filed, the LLP will be officially dissolved, and it will no longer exist as a legal entity.
When a limited liability partnership (LLP) is facing financial distress, the partners have several options for liquidating the partnership’s assets.
- Voluntary liquidation – where the partners agree to dissolve the LLP and sell off its assets to pay off any debts and liabilities. This process is initiated by the partners filing a notice of voluntary liquidation with Companies House.
- Compulsory liquidation – which is initiated by creditors or the court, and is typically used as a last resort when the LLP is unable to pay its debts and the partners are unable to come to an agreement on a voluntary liquidation. In a compulsory liquidation, a liquidator is appointed by the court in order to realise assets and pay off any debts and liabilities.
- Administration – which is a process where an administrator is appointed to manage the LLP’s affairs, with the goal of rescuing the Partnership as a going concern or achieving a better result for the creditors than if the LLP were to be wound up.
LLP liquidation process
The liquidation process for a limited liability partnership (LLP) typically involves the following steps:
- Notification: The partners of the LLP must file a notice of voluntary liquidation with Companies House, and must also notify all creditors and members of the LLP.
- Appointment of a liquidator: The partners must appoint a liquidator to oversee the liquidation process and ensure that the LLP’s assets are sold off and any debts and liabilities are paid off.
- Sale of assets: The liquidator will sell off assets, such as property, equipment, and inventory, to pay off any outstanding debts and liabilities.
- Distribution of remaining assets: Any remaining assets will be distributed among the partners according to the terms of the partnership agreement.
- Filing of accounts and statement of dissolution: The liquidator must file accounts and a statement of dissolution with Companies House, and must also provide a final report to the partners.
- Dissolution: Once the liquidation process is complete, the legal structure will be dissolved, and it will no longer exist as a legal entity.
It’s also worth to mention that an LLP going through liquidation process should comply with the statutory requirements of their jurisdiction and all stakeholders must be informed.
In the case of a compulsory liquidation, the process is similar but initiated by the court and creditors. A liquidator is appointed by the court to sell off the assets and pay off any debts and liabilities, and the partners have less control over the process. The liquidator will also investigate the conduct of the partners in the run up to liquidation.
It’s important to note that once the LLP is in compulsory liquidation, the partners’ authority is removed and they are not able to make any decisions regarding the partnership, this is only done by the liquidator.
Read more: Understanding Liabilities in an LLP
Conclusion
To liquidate an LLP, the partners must pass a resolution to wind up the business and appoint a liquidator. The liquidator’s role is to collect and sell the assets, pay off any outstanding debts, and distribute any remaining funds among the partners. The process of liquidation must be conducted in accordance with the Limited Liability Partnerships Act 2000 and the Insolvency Act 1986.
If the LLP is solvent, the liquidation process is known as a members’ voluntary liquidation and can be completed relatively quickly. Should the partnership be insolvent, the process is known as a creditors’ voluntary liquidation and will take longer as the liquidator must first pay off the creditors before distributing funds among the partners.
If you are thinking of closing your LLP and need to talk though your options simply complete the online enquiry form and one of the team will return your call.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.