Category Archives: Foreign Direct Investment In Limited Liability Partnerships (LLPs) In India 2012

FDI In Limited Liability Partnerships (LLPs) In India 2012

The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, Government of India (GOI) has released the Consolidated FDI Policy of India 2012. The FDI policy 2012 has become effective from April 10, 2012.

The FDI policy 2012 has provided certain crucial definitions that must be well known to all concerned. Perry4Law and Perry4Law Techno Legal Base (PTLB) have already shared the general conditions to be followed by all concerned to make successful and legal FDI in India.

In this post, Perry4Law and PTLB would share the conditions precedent for FDI in Limited Liability Partnerships (LLPs) in India as per the Consolidated FDI Policy of India 2012 of DIPP.

FDI in LLPs in India is permitted, subject to the following conditions:

(i) FDI will be allowed, through the Government approval route, only in LLPs operating in sectors/activities where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance conditions (such as ‘Non Banking Finance Companies’ or ‘Development of Townships, Housing, Built-up infrastructure and Construction-development projects’ etc.).

(ii) LLPs with FDI will not be allowed to operate in agricultural/plantation activity, print media or real estate business.

(iii) An Indian company, having FDI, will be permitted to make downstream investment in an LLP only if both-the company, as well as the LLP- are operating in sectors where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance conditions.

(iv) LLPs with FDI will not be eligible to make any downstream investments.

(v) Foreign Capital participation in LLPs will be allowed only by way of cash consideration, received by inward remittance, through normal banking channels or by debit to NRE/FCNR account of the person concerned, maintained with an authorized dealer/authorized bank.

(vi) Investment in LLPs by Foreign Institutional Investors (FIls) and Foreign Venture Capital Investors (FVCIs) will not be permitted. LLPs will also not be permitted to avail External Commercial Borrowings (ECBs).

(vii) In case the LLP with FDI has a body corporate that is a designated partner or nominates an individual to act as a designated partner in accordance with the provisions of Section 7 of the LLP Act, 2008, such a body corporate should only be a company registered in India under the Companies Act, 1956 and not any other body, such as an LLP or a trust.

(viii) For such LLPs, the designated partner “resident in India”, as defined under the ‘Explanation’ to Section 7(1) of the LLP Act, 2008, would also have to satisfy the definition of “person resident in India”, as prescribed under Section 2(v)(i) of the Foreign Exchange Management Act, 1999.

(ix) The designated partners will be responsible for compliance with all the above conditions and also liable for all penalties imposed on the LLP for their contravention, if any.

(x) Conversion of a company with FDI, into an LLP, will be allowed only if the above stipulations are met and with the prior approval of FIPB/Government.