November 2007 - Version 7

This booklet is a guide to winding up your limited liability partnership or removing it from the register. The booklet summarises some of the rules that apply to voluntary arrangements, in administration and administration orders, receivers, and voluntary and compulsory liquidations. It also covers how and why limited liability partnerships are struck off and dissolved.

This booklet also covers how, in certain circumstances, your limited liability partnership may be restored to the register.

Please remember that if your limited liability partnership is considering liquidation, or any other measures to deal with insolvency, you should seek appropriate professional advice or consult an authorised insolvency practitioner.

You will find the relevant law in the Limited Liability Partnerships Act 2000, the Insolvency Rules 1986, and in the Limited Liability Partnerships Regulations 2001 which apply parts of the Companies Act 1985 (as amended in 1989 and later) and the Insolvency Act 1986 to limited liability partnerships.

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CHAPTER 1
General insolvency information

1. What are insolvency proceedings?

These are formal measures to deal with debts of limited liability partnerships. Many different types of insolvency proceedings apply to limited liability partnerships. All are covered in this booklet.

2. Do all limited liability partnerships have to go through insolvency proceedings before being dissolved?

No. If the Registrar has reason to believe that a limited liability partnership is not carrying on business or is not in operation, he may strike its name off the register and dissolve it without going through liquidation. A limited liability partnership that is not trading may apply to the Registrar to be struck off the register. This procedure is not an alternative to formal insolvency proceedings.

More information about striking off and dissolution of a limited liability partnership is given in chapter 7 of this booklet.

3. Can anyone supervise insolvency procedures?

All liquidators, administrators, administrative receivers and supervisors taking office on or after 29 December 1986 must be authorised insolvency practitioners.

Receiver managers appointed under the Law of Property Act (LPA) do not have to be authorised.

Insolvency practitioners may be authorised by:

• the Chartered Association of Certified Accountants;
• the Insolvency Practitioners' Association;
• the Institute of Chartered Accountants in England and Wales;
• the Institute of Chartered Accountants in Ireland;
• the Institute of Chartered Accountants in Scotland;
• the Law Society;
• the Law Society of Scotland; or
• the Secretary of State for Business, Enterprise and Regulatory Reform.

• continuing to trade when the limited liability partnership was insolvent;
• failing to keep proper accounting records;
• failing to prepare and file accounts or make returns to Companies House; and
• failing to send in returns or pay to the Crown any tax that is due.

• the administrator, if there is an administration order;
• the liquidator, if the limited liability partnership is being wound up; or
• the limited liability partnership, in other circumstances.

3. Who considers the proposal?

When the limited liability partnership has proposed the arrangement, the nominee appointed to supervise its implementation reports to the court within 28 days on whether, in his or her opinion, a meeting of the creditors should be called. When the administrator or liquidator proposes the agreement, the nominee reports on whether a meeting of the members and a meeting of the creditors of the limited liability partnership should be called.

4. How is a proposed voluntary arrangement approved?

The meeting summoned by the nominee decides whether to approve the voluntary arrangement which, subject to certain restrictions, may be approved with or without modifications. Any modifications must be agreed with the limited liability partnership. It is then binding on all creditors who had notice of the meeting and were entitled to vote. All creditors who had notice of the meeting are bound by the terms of the arrangement.

5. What happens when the arrangement is approved?

If the meeting of creditors approves a voluntary arrangement, then the nominee or his replacement becomes the supervisor of the arrangement.

6. What needs to be sent to Companies House?

The supervisor must send a copy of the chairman's report of the meeting.

At least once every 12 months, the supervisor must send an account of receipts and payments, together with a progress report, to all interested parties including the Registrar.

When the arrangement is completed, the supervisor must notify the Registrar, within 28 days after final completion. If the arrangement is suspended or revoked, the Registrar must be notified.

The appropriate forms are:

Please note: these forms are not available from Companies House. They can be obtained from legal stationers or by visiting the Insolvency website at http://www.insolvency.gov.uk/

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CHAPTER 3
‘In administration’ and ‘administration orders’

The current law concerning administration was introduced with effect from 1st October 2005 as per Statutory Instrument 2005 No. 1989, the Limited Liability Partnerships (amendment) regulations 2005.  For details of the previous law, see Part 2 of this chapter. Under the new regime, a limited liability partnership will be described as being ‘in administration’ – under the old regime a limited liability partnership would be described as subject to an ‘administration order’. We have used these two terms to describe the different regimes.  

What follows is a brief outline of the process of administration: it is not a complete statement of the law.

Part 1: Cases beginning on or after 1st October 2005: ‘In administration’

1. What is ‘in administration’?
Administration is when a person, ‘the administrator, is appointed to manage the limited liability partnership’s affairs, business and property for the benefit of the creditors.

The person appointed must be an insolvency practitioner and has the status of an officer of the court (whether or not he or she is appointed by the court).

The objective of administration is to:

• rescue the limited liability partnership as a going concern;
• achieve a better price for the limited liability partnership’s assets or otherwise realise their value more favourably for the creditors as a whole than would be likely if the limited liability partnership were wound up (without first being in administration); or
• in certain circumstances, realise the value of property in order to make a distribution to one or more preferential creditors.

2. How doesthe limited liability partnership enter administration?
The limited liability partnership enters administration when the appointment of an administrator takes effect. An administrator may be appointed by:

• an administration order made by the court;
• the holder of a floating charge; or
• its members.

The administrator must perform his or her functions as quickly and efficiently as reasonably practicable.

3. What are the effects on a company of being in administration?
When the limited liability partnership enters administration:

• any pending winding-up petitions will be dismissed or suspended;
• there will be a moratorium on insolvency and on other legal proceedings;
• if an administrative receiver has been appointed, he or she must vacate office;
• if a receiver of part of the limited liability partnership’s property has been appointed, he or she must vacate office (if the administrator requires this).

4. Who must be told that the limited liability partnership is in administration?
As soon as reasonably practicable, an administrator must send a notice of his or her appointment to the limited liability partnership and each of its creditors and publish a notice of his or her appointment in the Gazette and in a newspaper in the area where the limited liability partnership has its principal place of business.

The administrator must send a notice of his or her appointment to the Registrar on Form 2.12B.

While the limited liability partnership is in administration, every business document issued by or on behalf of the limited liability partnership or the administrator must state the name of the administrator and that he or she is managing the affairs, business and property of the limited liability partnership

5. What does the process of administration involve?

The administrator will request a statement of the limited liability partnership’s affairs from relevant people (e.g. an officer or employee of the company).

The statement setting out the proposals must be sent to:

• the Registrar of Companies;
• every creditor of the limited liability partnership with an invitation to an initial creditors’ meeting, if one is to be held. The business of the initial creditors meeting will be to approve (with or without modifications) the statement of proposals. Following the initial meeting, the administrator ;
• may hold further creditors’ meetings, form a creditors committee, or deal with matters in correspondence between the administrator and creditors;
• every member of the limited liability partnership unless the administrator undertakes to provide a copy free of charge to any member of the limited liability partnership who applies in writing for a copy. Any revisions to the proposals following a creditors’ meeting must, likewise, be notified to members.

Decisions taken at creditors’ meetings must be reported to the Register of Companies on Form 2.23B and to the court.

6. When does administration end?

There are several ways in which administration can come to an end.

Administration can end automatically when the administrator’s term of office expires. The appointment of an administrator expires after 1 year. However, this may be extended with the consent of creditors or the court. Any extension must be notified to the Registrar on Form 2.31B .

An administrator appointed under a court order may apply to the court to end administration if he or she thinks that the purpose of the administration cannot be achieved or the limited liability partnership should not have entered administration, or a creditors’ meeting requires the application. The court will discharge the administration order and the administrator must notify the Registrar on Form 2.33B. 

An administrator appointed by the holders of a floating charge or by its members of the limited liability partnership may end administration when the purpose of administration has been sufficiently achieved. The administrator must file notice with the court and with the Registrar on Form 2.32B. 

Administration may end on the application of a creditor to the court alleging an improper motive on the part of the person who appointed the administrator or applied to the court for an administration order. The administrator must send a copy of the order with Form 2.33B to the Registrar within 14 days of the order being made.

Administration may end when the limited liability partnership moves into creditors’ voluntary winding up. This can happen where the administrator thinks that each secured creditor is likely to be paid and a distribution will be made to unsecured creditors, if there are any. The administrator must notify the Registrar on Form 2.34B and send copies to the court and each creditor. The limited liability partnership will then be wound up as if a resolution for voluntary winding up had been passed on the day on which notice is registered with the Registrar.

Administration may end when the limited liability partnership moves into dissolution. This can happen if the administrator thinks that a company has no property with which to make a distribution to its creditors. The administrator must send notice to the Registrar on Form 2.35B and send copies to the court and each creditor. 3 months after the date the form is registered with the Registrar, the limited liability partnership will be dissolved unless, on application to the court, an order is made to extend or suspend the period or stop the dissolution. Notice of the order must be notified to the Registrar on Form 2.36B.

7. Which forms should be used?
From 1st October 2005 as per Statutory Instrument 2005 No. 1989, the Limited Liability Partnership’s (Amendment) Regulations 2005 introduced new statutory forms for filing with the Registrar, some of which are listed below:

Please note: These forms are not available from Companies House. They can be obtained from legal stationers or by visiting the Insolvency website at http://www.insolvency.gov.uk/

Part 2 : Cases that began before 1st October 2005: Administration orders

1. What is an administration order?

It is a court order made to appoint an administrator to manage the limited liability partnership's affairs.

2. What is the purpose of an administration order?

Its purpose may be to:

• save the whole or any part of the limited liability partnership as a going concern; or
• approve a limited liability partnerships voluntary arrangement; or
• sanction (agree to) a compromise or arrangement; or
• get a better price for the limited liability partnership's assets or otherwise realise their value more favourably than in a winding-up.

3. What is the effect of the order?

While an administration order is in force, the limited liability partnership cannot be wound up and an administrative receiver cannot be appointed or, if previously appointed, they must vacate office. There are restrictions on enforcing any security over the limited liability partnership's property, selling any goods and starting any legal proceedings. More details about receivers are given in chapter 4.

4. When may a court make an administration order?

A court may make an administration order when the limited liability partnership is, or is likely to become, unable to pay its debts and the court considers that the making of an administration order could achieve one of the purposes outlined above.

5. Who may make a petition for an administration order?

This may be done by the limited liability partnership itself, or one or more of its creditors including any contingent (existing) or prospective creditors. The administrator appointed by the order must notify the Registrar of the order.  

6. Who must an administrator notify of his or her appointment?

An administrator must:

• advertise the order in the Gazette and in a newspaper which is the most appropriate for ensuring that the order comes to the notice of the limited liability partnership's creditors; and
• send a copy of the court order to the Registrar with Forms 2.6 and 2.7.

  7. What are the administrator's duties?

The administrator takes control of all the property to which the limited liability partnership is, or appears to be, entitled. He or she prepares proposals for achieving the purpose for which the administration order was made and calls a meeting of creditors to consider those proposals. If the majority of creditors approve the proposals, the administrator then manages the affairs, business and property of the limited liability partnership in accordance with the proposals.

8. Does the administrator need to send anything else to Companies House?

Yes. The administrator must send details of the proposals within three months after the order was made. Then, every six months, the administrator must send an account of receipts and payments.

9. How long does an administration order last?

It continues until the court discharges it - in other words, decides that the order is no longer needed. If there is a court order to discharge the order, or to vary its terms, the administrator must send a copy to the Registrar within 14 days after the order was made.

10. Which forms should be used?

The appropriate forms are:

Please note: These forms are not available from Companies House. They can be obtained from legal stationers or by visiting the Insolvency website at http://www.insolvency.gov.uk/.

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CHAPTER 4
Receivers

1. What is a receiver?

There are are two kinds of receiver and their powers vary according to the terms of their appointment.

An administrative receiver is a receiver or manager of the whole, or substantially the whole, of a limited liability partnership's property who is appointed by or on behalf of the holders of any debentures of the limited liability partnership secured by a floating charge. He or she has the power to sell (or otherwise realise) the assets covered by the floating charge and apply the proceeds to the debt owed to the charge-holder.

Receivers who are not administrative receivers may be appointed in other circumstances. For example, under powers contained in an instrument or document creating a charge over a limited liability partnership's property, a receiver or manager may be appointed until the debt is recovered. Receivers may also be appointed under the Law of Property Act 1925.

2. Who gives notice of the receiver's appointment?

The person who appoints the administrative receiver, receiver or manager, or has them appointed under the powers contained in an instrument, is responsible for informing the Registrar within seven days of the appointment. An administrative receiver must also publish notice of his or her appointment in the Gazette and in an appropriate newspaper.

When the administrative receiver, receiver or manager ceases to act they must notify the Registrar.

3. What must the receiver send to Companies House?

Within three months of appointment, an administrative receiver must make a report to all of the following:

• the Registrar;
• the limited liability partnership's creditors;
• the holders of a floating charge; and
• any trustees for secured creditors of the limited liability partnership.

• for administrative receivers, at 12-monthly intervals thereafter;
• for receivers and managers, at 6-monthly intervals.

Please note: With the exception of Forms 405(1) and 405(2), these forms are not available from Companies House. They can be obtained from legal stationers or by visiting the Insolvency website at http://www.insolvency.gov.uk/.

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CHAPTER 5
Voluntary liquidation

There are two kinds of voluntary liquidation:

• members' voluntary liquidation (MVL) - which means the designated members have made a statutory declaration of solvency;
• creditors' voluntary liquidation (CVL) - which means the designated members have not made such a declaration.

• advertised in the Gazette within 14 days; and
• sent to the Registrar within 15 days.

• post a notice of the meeting to each creditor at least seven days before the date of the meeting;
• advertise the date of the meeting in the Gazette and in two newspapers in the area where the limited liability partnership has its principal place of business; and
• prepare a statement of affairs for consideration at the meeting. A copy of the statement must be sent to the Registrar within seven days of the meeting.

Please note: With the exception of Form 600, these forms are not available from Companies House. They can be obtained from legal stationers or by visiting the Insolvency website at http://www.insolvency.gov.uk/

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CHAPTER 6
Compulsory liquidation

1. What is 'compulsory liquidation'?

Compulsory liquidation of a limited liability partnership is when the limited liability partnership is ordered by a court to be wound up.

2. Which courts can order a compulsory liquidation?

The High Court, or a county court with the appropriate jurisdiction, may order the winding-up of a limited liability partnership. This may be, for example, on the petition of a creditor or creditors on the grounds that the limited liability partnership cannot pay its debts.

• the limited liability partnership itself;
• one or more of the limited liability partnership's members;
• the Secretary of State for Business, Enterprise and Regulatory Reform;;
• the Financial Services Authority (formerly the Securities and Investment Board); or
• the Official Receiver.

The Official Receiver becomes liquidator on the making of a winding-up order against a limited liability partnership, unless the court orders otherwise.

• traded or otherwise carried on business;
• changed its name;
• for value, disposed of property or rights that, immediately before it ceased to be in business or trade, it held for disposal or gain in the normal course of its business or trade (for example, a limited liability partnership in business to sell apples could not continue selling apples during that three-month period but it could sell the truck it once used to deliver the apples or the warehouse where they were stored); or
• engaged in any other activity except one necessary or expedient for making a striking-off application, settling the limited liability partnership's affairs or meeting a statutory requirement (for example, a limited liability partnership may seek professional advice on the application, pay the costs of copying the Form LLP652a, etc). However, a limited liability partnership can apply for striking off if it has settled trading or business debts in the previous three months.

• any insolvency proceedings (such as liquidation, including where a petition has been presented but has not yet been dealt with); or
• a Section 425 scheme (that is a compromise or arrangement between a limited liability partnership and its creditors).

• two designated members; or
• the majority, if there are more than two.

• creditors including all contingent (existing) and prospective (likely) creditors such as banks, suppliers, former employees if they are owed money by the limited liability partnership, landlords, tenants (for example, where a bond is refundable), guarantors and personal injury claimants. Also, you must notify appropriate offices of the H. M. Revenue & Customs (HMRC)   and DSS if there are outstanding, contingent or prospective liabilities;
• employees;
• managers or trustees of any employee pension fund; and
• any members who have not signed the form.

* HM Revenue & Customs (HMRC ) was formed on the 18 April 2005, following the merger of Inland Revenue and HM Customs and Excise Departments.

• the last known address (if an individual); or
• the principal/registered office (if a company or partnership).

• trades or otherwise carries on business;
• changes its name;
• for value, disposes of any property or rights except those it needed in order to make or proceed with the application (for example a limited liability partnership may continue the application if it disposes of a telephone which it kept to deal with enquiries about its application);
• becomes subject to formal insolvency proceedings or makes a Section 425 application (a compromise or arrangement between a limited liability partnership and its creditors);
• engages in any other activity, unless it was necessary or expedient in order to: make or proceed with a striking-off application; conclude those of its affairs that are outstanding because of what has been necessary or expedient to make or proceed with an application (such as paying the costs of running office premises while concluding its affairs and then finally disposing of the office); or comply with a statutory requirement.

• the limited liability partnership has broken any of the conditions of its application (for example, it has traded, changed its name or become subject to insolvency proceedings) during the three-month period before the application, or afterwards;
• the designated members have not informed interested parties;
• any of the declarations on the form are false;
• some form of action is being taken, or is pending, to recover any money owed (such as a winding-up petition or action in a small claims court);
• other legal action is being taken against the limited liability partnership;
• the designated members have wrongfully traded or committed a tax fraud or some other offence.

• he has not received documents from a limited liability partnership that should have sent them to him; or
• mail he has sent to a limited liability partnership's registered office is returned undelivered.

The Company Law Official Notifications Supplement to the London Gazette publishes weekly notices on microfiche. Copies are available from:

The London Gazette, PO Box 7923, London SE1 5ZH
web site: www.gazettes-online.co.uk
telephone: 020 7394 4517

5. What happens to the assets of a dissolved limited liability partnership?

From the date of dissolution any assets held by a dissolved limited liability partnership will be 'bona vacantia'. This means they belong to the Crown. The limited liability partnership’s bank account will be frozen and any credit balance in the account will be passed to the Crown. Enquiries about bona vacantia property should be addressed, as appropriate, to:

• the person was not given a copy of the limited liability partnership's application;
• the limited liability partnership's application involved a breach of the conditions of the application; or
• for some other reason it is just to do so.

• damages for personal injuries including any sum under Section 1(2)(c) of the Law Reform (Miscellaneous Provisions) Act 1934 (funeral expenses); or
• damages under the Fatal Accidents Act 1976 or the Damages (Scotland) Act 1976.

• the solicitor dealing with any bona vacantia assets, namely the Treasury Solicitor or the solicitor to the relevant Duchy, and
  
  The Registrar of Companies
  Limited Liability Partnerships Team
  Companies House
  Crown Way
  Cardiff CF14 3UZ
  Tel: 029 2038 0744
  Fax: 029 20381436
  DX: 33050 Cardiff 1

• the originating document was served; and
• the solicitor dealing with the bona vacantia assets has no objection to the restoration of the limited liability partnership (a copy of his or her letter should be attached to the affidavit or witness statement).

• when the limited liability partnership was incorporated and the nature of its objects (a copy of the certificate of incorporation and the incorporation document should be attached);
• its officers;
• its trading activity and, if applicable, when it stopped trading;
• an explanation of any failure to deliver accounts, annual returns or notices to the Registrar of Companies;
• details of the striking-off and dissolution;
• comments on the limited liability partnership's solvency;
• any other information that explains the reason for the application.

• delivery of any statutory documents to bring the limited liability partnership's public file up to date. These should be sent to the Registrar at least five working days before the hearing to allow him time to process and examine them as they may have to be returned for amendment;
• the correction of any irregularities in the limited liability partnership's structure.

Yes. The Treasury Solicitor, whose costs are normally met by the Claimant(s), will represent the Registrar. The limited liability partnership must normally pay any statutory penalties for late filing of accounts delivered to the Registrar outside the period allowed by the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001). The penalties that may be due are:

• unpaid penalties outstanding on accounts delivered late before the limited liability partnership was dissolved; and
• penalties due for accounts delivered on restoration, if the accounts were overdue at the date the limited liability partnership was dissolved.

For more information about penalties, please see our booklet, ‘Limited Liability Partnerships Administration and Management’.

6. What happens when the order for restoration is made?

An office copy of the order with the court seal must be delivered to the Registrar by the applicant wishing to restore the limited liability partnership. A limited liability partnership is regarded as restored when the order is delivered.

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CHAPTER 10
Further information

1. Where can I go for help?

Staff at Companies House in Cardiff will be able to advise you on general matters, but if you are considering liquidation or insolvency proceedings you should seek the advice of an insolvency practitioner or the Insolvency Service (tel. Mike Norris 0207 291 6734).

Complaints about the conduct of a licensed insolvency practitioner should be sent, in writing, to:

The Insolvency Practitioners' Section
The Insolvency Service
Area 1.10
PO Box 203
21 Bloomsbury Street
London
WC1B 3QW

They will then forward the complaint to the practitioner's authorising body.

2. How do I send forms to the Registrar?

• Documents, including court orders, should display the correct limited liability partnership name and registration number.
• You should supply documents in portrait format (that is, with the shorter edge across the top).