INDIA: India foreign investment permitted in LLPs

Tuesday April 29 2014

The Reserve Bank of India (RBI) has announced that limited liability partnerships (LLPs) formed and registered under the Limited Liability Partnership Act 2008 will now be able to accept foreign direct investment (FDI) subject to the conditions set out in Annex I of the circular for the purposes of India foreign investment rules. Under the previous rules, only a company incorporated under the Companies Act 1956 or a Venture Capital Fund was eligible to accept FDI.

Eligible Investors

A person resident outside India or an entity incorporated outside India shall be eligible investor for the purpose of FDI in LLPs. However, the following persons shall not be eligible to invest in LLPs:

(i) a citizen/entity of Pakistan and Bangladesh or

(ii) a SEBI registered Foreign Institutional Investor (FII) or

(iii) a SEBI registered Foreign Venture Capital Investor (FVCI) or

(iv) a SEBI registered Qualified Foreign Investor (QFI) or

(v) a Foreign Portfolio Investor registered in accordance with Securities and Exchange Board of India(Foreign Portfolio Investors) Regulations, 2014 (RFPI).

Eligibility of LLP for accepting foreign Investment

An LLP, existing or new, operating in sectors/activities where 100% FDI is allowed under the automatic route of FDI Scheme would be eligible to receive FDI.

An LLP engaged in the following sectors/activities shall not be eligible to accept FDI:

a) Sectors eligible to accept 100% FDI under automatic route but are subject to FDI-linked performance related conditions (for example minimum capitalisation norms applicable to `Non-Banking Finance Companies` or `Development of Townships, Housing, Built-up infrastructure and Construction-development projects`, etc.);

b) Sectors eligible to accept less than 100% FDI under automatic route;

c) Sectors eligible to accept FDI under Government Approval route;

d) Agricultural/plantation activity and print media; or

e) Sectors not eligible to accept FDI i.e. any sector which is prohibited under the extant FDI policy as well as sectors/activities prohibited in terms of Regulation 4(b) to Notification No. FEMA.1/ 2000-RB dated 3rd May 2000, as amended from time to time.

Entry Route

Any FDI in a LLP shall require prior Government/FIPB approval.

Any form of foreign investment in an LLP, direct or indirect (regardless of nature of ‘ownership’ or ‘control’ of an Indian Company) shall require Government/FIPB approval.

Click on the above link for further details.