In 2008, Government introduced Limited Liability Partnership firms to be formed in India. Globally, LLPs are one of the most popular way to form a company, however, in India it is not taken off as was expected.
In short, LLP is a sort of firm that combines the benefits of a Private Limited Company and a partnership firm. Unlike regular partnerships, an LLP partner is not responsible or liable for another partner’s negligence.
According to ET news, RBI has now agreed to notify FDI rules in limited liability partnership firms. Last year, Govt. had allowed allowed foreign investors to pick up stakes in LLPs through the 100% automatic FDI approval route but the proposal did not come into effect as the RBI did not notify the rules under the Foreign Exchange Management Act.
Here is the PDF of directive released by Government last year for Approval for FDI in Limited Liability Partnership firms. Following are the high level guidelines that Govt. had set for the same.
The FDI in LLPs will be implemented in a calibrated manner, beginning with the ‘open’ sectors where monitoring is not required, subject to the following conditions:
- LLPs with FDI will be allowed, through the Government approval route, in those sectors / activities where 100% FDI is allowed, through the automatic route and there are
no FDI-linked performance related conditions.
- LLPs with FDI will not be allowed to operate in agricultural / plantation activity, print
media or real estate business.
- LLPs with FDI will not be eligible to make any downstream investments.
According to me, this should help lot of start-ups in India, who want to start a company with a foreign partner. Also, given that 100% FDI is allowed, foreign investors can now easily put in money in LLP startups.
I am not really an expert in this field – so cannot comment much. Would love to hear readers comment on this who have more knowledge about it