THE
Government of India has given nod to FDI in LLP firms, subject to certain
conditions:
A. Insertion of a new paragraph (2.1.41): A new
paragraph (2.1.41) is inserted, as below:
“Limited Liability Partnership” means a Limited Liability Partnership
firm, formed and registered under the Limited Liability Partnership Act,
2008.
B. Insertion of a new paragraph 3.3.5, replacing the present
paragraph 3.3.5: A new paragraph (3.3.5) is inserted, replacing the
present paragraph 3.3.5, as below:
“3.3.5 FDI in Limited Liability Partnership (LLPs): FDI
in LLPs is permitted, subject to the following conditions:
(a)
FDI in LLPs will be allowed, through the Government approval route, only for
LLPs operating in sectors/activities where 100% FDI is allowed, through the
automatic route and there are no FDI-linked performance related conditions (such
as ‘Non Banking Finance Companies’ or ‘Development of Townships, Housing,
Built-up infrastructure and Construction-development projects’ etc.).
(b)
LLPs with FDI will not be allowed to operate in agricultural/plantation
activity, print media or real estate business.
(c)
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 related conditions.
(d)
LLPs with FDI will not be eligible to make any downstream
investments.
(e)
Foreign Capital participation in the capital structure of 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 authorised dealer/authorised bank.
(f)
Investment in LLPs by Foreign Institutional Investors (FIIs) and Foreign Venture
Capital Investors (FVCIs) will not be permitted . LLPs will also not be
permitted to avail External Commercial Borrowings (ECBs).
(g)
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 trust.
(h)
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.
(i)
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.
(j)
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.
(C) Renumbering of the present paragraph 3.3.5, as paragraph
3.3.6: The present paragraph 3.3.5 is renumbered as paragraph 3.3.6, ,
to read as below:
“3.3.6 FDI in Other Entities : FDI in resident entities
other than those mentioned above, is not permitted.”
3.0
The above decision will take immediate effect.
4.0
The above provisions will be incorporated in the next Circular on Consolidated
FDI Policy to be issued on 30.9.2011.
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