Foreign direct investment norms eased for Limited Liability partnerships
May 11th, 2011 - 9:05 pm ICT by IANSNew Delhi, May 11 (IANS) India Wednesday eased investing norms for limited liability partnership (LLPs) firms, allowing them to receive foreign funds, but restricted such infusion only to those companies which were operating in sectors where foreign direct investment restrictions are not in place.
“LLPs with foreign direct investment (FDI) will be allowed, through the government approval route, in those sectors where 100 percent FDI is allowed,” said an official note Wednesday after the Cabinet Committee on Economic Affairs (CCEA) gave its approval to such investments.
“The CCEA’s approval will benefit the Indian economy by attracting greater FDI, creating employment and bringing in international best practices and latest technologies in the country,” it added.
A limited liability entity is a hybrid of existing partnership firms and full-fledged companies. It is a separate legal entity, liable to the full extent of its assets with the liability of the partners being limited to their agreed contribution in LLP.
However, LLPs, which receive FDI will not be allowed to operate in agricultural or plantation activity, print media or real estate business and will also not be eligible to make any downstream investments.
Downstream investments relate to fresh investments in activities that may fall in a different spectrum of activity all together.
“An Indian company, having FDI, will be permitted to make downstream investment in LLPs only if both the company, as well as the LLP are operating in sectors where 100 percent FDI is allowed,” the statement added
Foreign capital participation in the capital structure of the LLPs will be allowed only by way of cash considerations, received by inward remittance, through normal banking channels, or by debit to NRE (Non-resident external account) of the person concerned.
However, foreign institutional investors (Flls) and foreign venture capital funds will not be permitted to invest in LLPs.
LLPs will also not be permitted to raise funds through the external commercial borrowings route.
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Tags: cabinet committee, capital participation, capital structure, ccea, downstream investment, economic affairs, estate business, foreign direct investment, foreign institutional investors, government approval, indian economy, investment norms, investment restrictions, liability entity, limited liability partnership, limited liability partnerships, plantation activity, remittance, separate legal entity, venture capital funds