Foreign Direct Investment (FDI) in Limited Liability Partnership (LLP)

Department of Industrial Policy and Promotion has reviewed Foreign Direct Investment (FDI) policy and specied amendments to conditions for acceptance of FDI in LLP vide its Press Note No. 12 (2015 Series) dated 24 November 2015. The same was notied by Reserve Bank of India (RBI) vide Notication No.FEMA.362/2016-RB dated 15 February 2016.

Glimpse of the said amendment is listed below:

1. FDI in Limited Liability Partnerships:

Foreign Direct Investment (FDI) in Limited Liability Partnerships (LLPs) has been permitted subject to the following conditions:

a. FDI is permitted under the automatic route in LLPs operating in sectors/activities where 100% FDI is allowed, through the automatic route and no FDI - linked performance conditions.

b. An Indian company or an LLP, having foreign investment, will be permitted to make downstream investment in another company or LLP in sectors in which 100% FDI is allowed under the automatic route and there are no FDI linked performance conditions.

c. FDI in LLP is subject to the compliance of the conditions of LLP Act, 2008

2. Condition for Downstream investment by LLPs:

Downstream investments by LLPs will be subject to the following conditions:

a. LLP making downstream investment is to notify SIA, DIPP and FIPB of its downstream investment in the form available within 30 days of such investment, even if capital instruments have not been allotted along with the modality of investment in new/existing ventures (with/without expansion programme);

b. Issue/Transfer/pricing/valuation of capital shall be in accordance with applicable SEBI/RBI guidelines;

c. For the purpose of downstream investment, LLPs making the downstream investment would have to bring in requisite funds from abroad and not leverage funds from the domestic market. This would, however, not preclude downstream companies/LLPs, with operation, from raising debt in the domestic market. Downstream investment through internal accruals are permissible, subject to the provisions of para 3.10.3 and 3.10.4.1 For the purpose of FDI Policy, internal accruals will mean as prots transferred to reserve account after payment of taxes.

Other important aspects for FDI in LLP are as follows:

1. Eligible Foreign Investors

a) Any person resident outside India, and

b) Any entity incorporated outside India;

Other than following persons

a) A citizen/entity of Pakistan and Bangladesh

b) A SEBI registered Foreign Institutional Investor (FII)

c) A SEBI registered Foreign Venture Capital Investor (FVCI)

d) A SEBI registered Qualied Foreign Investor (QFI)

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

2. Eligible investment:

Contribution to the capital of a LLP would be an eligible investment under the Scheme.

Note: Investment by way of 'prot share' will fall under the category of reinvestment of earnings.

3.  Mode of payment

FDI in LLP shall be only by way of cash consideration received by way of Inward remittance through normal banking channels.

b) Debit to NRE/FCNR (B) account of the person concerned, maintained with an AD Category - I bank

4. Reporting:

a) Reporting of FDI shall be done to RBI in Form FOREIGN DIRECT INVESTMENT LLP (I) through an AD Category – I bank together with a copy/ies of the FIRC/s evidencing the receipt of the remittance along with the KYC report in Annexure IV along with valuation certicate not later than 30 days from the date of receipt of the amount of consideration. The report shall be acknowledged by

the Regional Office  concerned, after allotting a Unique Identication Number (UIN) for the amount reported.

b) Disinvestment / transfer of capital contribution or prot share between a resident and a non-resident (or vice versa) shall be reported within 60 days from the date of receipt of funds in Form FOREIGN DIRECT INVESTMENT LLP (II)

c) Annual return on Foreign Liabilities and Assets will have to be led by LLPs having foreign investment with RBI on or before 15 July every year. 

5. Other Conditions:

a) Conversion of a company with FDI, into an LLP, will be allowed only stipulations as mentioned above (except the stipulation as regards mode of payment) are met.

b) LLPs shall not be permitted to avail External Commercial Borrowings (ECBs).