Setting Up of Business, Industrial and Labour Laws · Limited Liability Partnership

Compromise, Arrangement and Reconstruction of an LLP

Updated 11 October 2026 · Fact-checked

A compromise or arrangement of an LLP is a deal between the LLP and its creditors or partners, sanctioned by the Tribunal under Section 60. A three-fourths majority in value must agree. Section 62 adds reconstruction and amalgamation of LLPs, where the Tribunal can transfer assets and liabilities. An LLP cannot be amalgamated with a company.

Understand Compromise, Arrangement and Reconstruction of LLP

An LLP may get into financial or structural trouble. It may owe money it cannot pay on time, or its partners may want to restructure. The LLP Act, 2008 gives a court-supervised route for this: a compromise or arrangement sanctioned by the Tribunal. Sections 60, 61 and 62 cover it.

Under Section 60, the deal can be between the LLP and its creditors, or between the LLP and its partners. The LLP, any creditor or partner can apply to the Tribunal. If the LLP is being wound up, the liquidator can apply. The Tribunal then orders a meeting of the creditors or partners, as the case may be. The meeting is called, held and conducted as prescribed or as the Tribunal directs.

At the meeting, a majority representing three-fourths in value of the creditors or partners must agree. If the Tribunal then sanctions the scheme by order, it binds all the creditors or all the partners, and also the LLP. If the LLP is being wound up, it binds the liquidator and the contributories. The Tribunal will not sanction the scheme unless the applicant has disclosed all material facts. These include the latest financial position of the LLP and any pending investigation proceedings. The disclosure is made by affidavit or otherwise.

After sanction, Section 61 lets the Tribunal supervise the working of the scheme. It can give directions and make modifications it thinks necessary. If the scheme cannot be worked satisfactorily, even with modifications, the Tribunal may order winding up of the LLP, on its own motion or on the application of a person interested in the LLP's affairs. That order is treated as made under Section 64.

Section 62 deals with reconstruction and amalgamation. Where a compromise or arrangement is proposed as part of a scheme for reconstruction of one or more LLPs, or amalgamation of two or more LLPs, and the undertaking, property or liabilities of a transferor LLP are to pass to a transferee LLP, the Tribunal can make detailed provisions. It can order the transfer, continue pending legal proceedings, dissolve a transferor LLP without winding up, provide for dissenters, and settle incidental matters. The Explanation states that an LLP shall not be amalgamated with a company.

Key rules to remember

Majority required (Section 60(2)): Agreement of a majority representing ¾ in value of the creditors or partners at the meeting; The test is value, not just number of persons. The scheme binds all only if the Tribunal also sanctions it.
Who may apply (Section 60(1)): LLP, any creditor, any partner; the liquidator if the LLP is being wound up; The compromise is between the LLP and its creditors, or the LLP and its partners.
Filing of order under Section 60: File with Registrar within 30 days; effective only after it is filed; Default: penalty of ₹10,000 on the LLP and every designated partner, plus ₹100 per day after the first day, up to ₹1,00,000 for the LLP and ₹50,000 for each designated partner.
Filing of order under Section 62: Certified copy filed with Registrar within 30 days of the order; The same penalty structure applies on default (Section 62(4)).
Transfer by order (Section 62(2)): Property vests in, and liabilities become those of, the transferee LLP by virtue of the order; If the order so directs, property passes free of any charge that ceases under the scheme.
Safeguards in Section 62 provisos: Amalgamation of an LLP being wound up: Registrar's report needed. Dissolution of a transferor LLP: Official Liquidator's report needed.; Each report must say the affairs were not conducted in a manner prejudicial to partners or public interest.
Amalgamation with a company: An LLP shall not be amalgamated with a company; Stated in the Explanation to Section 62.

How to solve Compromise, Arrangement and Reconstruction of LLP questions

Use this order for any question on compromise, arrangement, reconstruction or amalgamation of an LLP. It matches the ICSI answer style: provision, facts, conclusion.

1Identify the type of scheme: compromise with creditors, compromise with partners, or reconstruction or amalgamation involving transfer to another LLP.
2Name the provision: Section 60 for compromise or arrangement, Section 61 for enforcement, Section 62 for reconstruction or amalgamation.
3Check who applied and to whom: the LLP, a creditor, a partner or the liquidator applies to the Tribunal, which orders the meeting.
4Test the vote: did a majority representing three-fourths in value of the creditors or partners at the meeting agree? Then check that the Tribunal sanctioned it.
5Check disclosure: were all material facts, including the latest financial position and any pending investigation, disclosed to the Tribunal?
6For reconstruction or amalgamation, check the provisos: the Registrar's report for an LLP being wound up, and the Official Liquidator's report before dissolving a transferor LLP. Also check that no company is involved.
7Apply the filing rule: 30 days with the Registrar, and the penalty for default.
8State a clear conclusion in one line, such as whether the scheme binds all, or whether it is not permitted.

Quickest way: Four-point check for Sections 60 to 62

When to use it: Use this for short-note questions or case facts where time is tight.

Who is the deal with: creditors, partners, or another LLP?
Vote: three-fourths in value, then Tribunal sanction.
Extra conditions: full disclosure (S.60), reports (S.62 provisos), no merger with a company.
Filing: 30 days with the Registrar; for S.60 the order takes effect only after filing.

Common mistakes in Compromise, Arrangement and Reconstruction of LLP

Saying the majority is three-fourths in number of members.
Students mix it up with the company-law idea of a majority in number.
Fix: Write exactly: a majority representing three-fourths in value of the creditors or partners at the meeting.
Saying the scheme binds everyone once the meeting approves it.
The Tribunal's role is overlooked.
Fix: The scheme binds all only if the Tribunal sanctions it by order.
Allowing an LLP to merge with a company.
Students carry over company merger rules.
Fix: The Explanation to Section 62 says an LLP shall not be amalgamated with a company. Section 62 covers only LLPs.
Forgetting that the Section 60 order takes effect only after filing with the Registrar.
Students stop at Tribunal sanction.
Fix: Add: filed within 30 days and effective only after filing. The default penalty applies to the LLP and every designated partner.
Treating Section 62 dissolution as winding up.
Both words sound alike.
Fix: Section 62(1)(iii) allows dissolution without winding up of a transferor LLP, after the Official Liquidator's report.
Ignoring disclosure of pending investigation.
Students remember only financial position.
Fix: The proviso to Section 60(2) requires disclosure of all material facts, including the latest financial position and any pending investigation.

Worked examples

Example 1

Alpha Traders LLP, Pune, owes money to several creditors and proposes a compromise with them. At the Tribunal-ordered meeting, creditors holding 80% in value of the debt present and voting agree. The Tribunal sanctions the compromise. Is it binding on a dissenting creditor? What must the LLP do next?

Show the solution

Provision: Section 60 covers a compromise between an LLP and its creditors, sanctioned by the Tribunal.
Vote: a majority representing three-fourths in value of the creditors at the meeting must agree. Three-fourths is 75%, and 80% in value is more than that.
Sanction: the Tribunal has sanctioned the compromise by order, so the second requirement is met.
Effect: a sanctioned compromise binds all the creditors, including the dissenting one, and also the LLP.
Filing: the LLP must file the order with the Registrar within 30 days. The order has effect only after it is filed.
Default: if the LLP does not file, the LLP and every designated partner face a penalty of ₹10,000, plus ₹100 for each day after the first, up to the statutory maximum.

Answer: Yes. The compromise was approved by 80% in value, which exceeds three-fourths, and was sanctioned by the Tribunal, so it binds the dissenting creditor. The LLP must file the order with the Registrar within 30 days, and it takes effect only after filing.

Example 2

Beta LLP and Gamma LLP propose a scheme of amalgamation. Beta's whole undertaking is to be transferred to Gamma, and Beta is to be dissolved without winding up. Gamma LLP also wishes to later merge with Delta Pvt Ltd, a company. Advise on the Tribunal's powers, the conditions for dissolving Beta, and the proposed merger with the company.

Show the solution

Provision: Section 62 applies where a compromise or arrangement is proposed for reconstruction or amalgamation of LLPs and property or liabilities pass from a transferor LLP to a transferee LLP.
Powers: the Tribunal may provide for transfer of the undertaking, property and liabilities to Gamma, continuation of pending legal proceedings by or against Gamma, dissolution of Beta without winding up, provision for dissenters, and incidental matters.
Effect of transfer: by virtue of the order, property vests in Gamma and liabilities become Gamma's. Property can pass free of a charge if the order so directs.
Condition for dissolving Beta: the Tribunal can order dissolution only after the Official Liquidator, on scrutiny of the books and papers, reports that Beta's affairs were not conducted in a manner prejudicial to the interests of its partners or to public interest.
Filing: within 30 days of the order, each LLP concerned must file a certified copy with the Registrar.
Merger with Delta: the Explanation to Section 62 says an LLP shall not be amalgamated with a company, so this cannot be done under the section.

Answer: The Tribunal can order the transfer to Gamma and dissolve Beta without winding up, once the Official Liquidator reports that Beta's affairs were not prejudicial to partners or public interest. A certified copy must be filed with the Registrar within 30 days. Gamma cannot be amalgamated with Delta Pvt Ltd, because an LLP cannot be amalgamated with a company.

Exam tips

Learn the figures exactly: three-fourths in value, 30 days, ₹10,000, ₹100 per day, ₹1,00,000 and ₹50,000 maximums.
Always cite the section: 60 for compromise, 61 for enforcement, 62 for reconstruction and amalgamation.
In case-study questions, check the vote threshold, Tribunal sanction and filing in that order, then conclude.
Write the line that an LLP cannot be amalgamated with a company whenever a merger question mentions a company.
Keep the two Section 62 reports separate: Registrar for an LLP being wound up, Official Liquidator for dissolving a transferor LLP.

Practice questions from Limited Liability Partnership

Compromise, Arrangement and Reconstruction of LLP in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Compromise, Arrangement and Reconstruction of LLP: frequently asked questions

What majority is needed for a compromise of an LLP?

A majority representing three-fourths in value of the creditors or partners at the meeting must agree. The Tribunal must then sanction the scheme. Only then does it bind all creditors or partners and the LLP.

Can two LLPs merge under the LLP Act, 2008?

Yes. Section 62 allows the Tribunal to sanction a scheme for reconstruction or amalgamation of LLPs. It can transfer the undertaking, property and liabilities to a transferee LLP and dissolve a transferor LLP without winding up.

Can an LLP be merged with a company?

No. The Explanation to Section 62 states that an LLP shall not be amalgamated with a company.

What happens if the compromise scheme cannot be worked?

Under Section 61, if the Tribunal is satisfied that a sanctioned scheme cannot be worked satisfactorily, with or without modifications, it may order winding up of the LLP. The Tribunal can act on its own motion or on the application of an interested person.