In the lifecycle of a Limited Liability Partnership (LLP), there may come a time when winding up the business becomes a strategic or unavoidable decision. The process is far from straightforward and entails a series of legal and financial steps that demand meticulous planning and execution.

This article aims to provide a comprehensive guide on how to wind up an LLP in the United Kingdom. We will delve into the regulatory requirements, timelines, and key considerations that business owners should be aware of to ensure a smooth and compliant winding-up process. Whether you’re contemplating dissolution due to operational challenges, changes in market conditions, or as part of a planned exit strategy, this article serves as a starting point to navigate the complexities involved.

How to Voluntarily Dissolve and Strike Off an LLP

To voluntarily dissolve and strike off an LLP in the UK, you must follow these steps:

  1. Hold a meeting of the LLP members to pass a resolution to voluntarily dissolve the LLP. This resolution must be passed by a majority of the LLP members, both in terms of the number of members and the value of their capital contributions.
  2. Appoint a liquidator to wind up the LLP. The liquidator can be any person, but it is usually a qualified accountant or solicitor.
  3. Notify the Companies House of the dissolution of the LLP. This can be done online or by post. You will need to pay a fee of £13.
  4. Pay any outstanding debts and liabilities of the LLP. The liquidator will be responsible for doing this.
  5. Distribute the remaining assets of the LLP to the members. The liquidator will do this in accordance with the LLP’s agreement.
  6. Apply to the Companies House to strike off the LLP. This can be done online or by post. You will need to pay a fee of £10.

The LLP will be dissolved three months after the Companies House receives your application to strike off the LLP.

I’m a Member of an LLP and Have Received a Winding up Petition; what Should I do?

A winding up petition is the final demand from a creditor. You have 7 days to act before a judge rules on whether to make the petition into an order, which would liquidate the LLP and strike its name off the Companies House register.

If you can pay the debt, do so immediately. Winding up petitions are advertised in the Gazette, the official journal of public record. Once banks see the winding up advertisement, your corporate bank accounts will be frozen, making it difficult to run the business.

Contact us for a free consultation. Swift and decisive action is the only way to stave off compulsory liquidation. Call one of our advisors to discuss your options and whether there is a legitimate chance to stop the petition.

Don’t bury your head in the sand. We have seen many people lose their companies by failing to tackle a winding up petition head-on. The clock starts ticking from the moment you receive the letter, and the ability to find a solution depends heavily on the time remaining. This is not a creditor threat you can ignore. You must act.

If Our LLP Can’t Pay the Debt, What are our Alternatives?

If your LLP can’t pay the debt, you have a few alternatives:

  • Negotiate with the creditor. You may be able to negotiate a payment plan or reduce the amount of the debt.
  • Seek professional advice from an insolvency practitioner. They can advise you on the best course of action for your LLP, which may include:

If you don’t take any action, the creditor may apply to the court for a winding up order. This will force your LLP into liquidation, and you will lose control of the business.

The Compulsory Winding up of an LLP

Compulsory winding up is a formal process to wind up an LLP and sell its assets to pay off its debts. It is initiated by a creditor who has obtained a winding up order from the court.

  1. The creditor applies to the court for a winding up order.
  2. The court holds a hearing to consider the application.
  3. If the court grants the application, it will make a winding up order.
  4. The Official Receiver (OR) is appointed as liquidator.
  5. The OR takes control of the LLP’s assets and sells them to pay off its debts.
  6. Once all the debts have been paid, the OR will dissolve the LLP and strike it off the Companies House register.

LLP members’ rights in a compulsory winding up:

LLP members have a number of rights in a compulsory winding up, including the right to:

  • Attend meetings of creditors and vote on resolutions.
  • Inspect the liquidator’s records.
  • Apply to the court for directions or orders.
  • Receive a distribution of the LLP’s assets, if there are any, once all the debts have been paid.

When Might an LLP be Wound up by its Creditors?

An LLP may be wound up by its creditors if it is unable to pay its debts. This can happen for a number of reasons, such as:

  • A decline in sales or revenue
  • Increased costs
  • Poor financial management
  • A major unexpected expense
  • A legal judgment against the LLP

Creditors may also wind up an LLP if they believe that the LLP is insolvent, even if it is still trading. This means that the LLP’s liabilities exceed its assets.

Examples of situations where an LLP might be wound up by its creditors:

  • The LLP has a large debt to a single creditor, such as a bank or a supplier.
  • The LLP has a number of smaller debts to multiple creditors, and it is unable to keep up with the repayments.
  • The LLP has received a winding up petition from a creditor, and the court has granted the petition.
  • The LLP is insolvent, and the Official Receiver has been appointed as liquidator.

As a Member of an LLP, Can I be Held Personally Liable for Debts?

As a member of an LLP, you have limited liability for the debts of the LLP. This means that you cannot be personally sued for the LLP’s debts, unless you have acted wrongfully or fraudulently.

Insolvency practitioners will investigate the behaviour of the LLP members during the insolvency process to determine whether they put the interests of the creditors first. If the insolvency practitioners find that the LLP members prioritized their own interests over the interests of the creditors, they may bring charges of wrongful or fraudulent trading.

If these charges are proven, the LLP members may be held personally liable for some or all of the LLP’s debt.