FDI In Limited Liability Partnerships Cleared
The cabinet committee on economic affairs on s Wednesday approved foreign direct investment (FDI) in limited liability partnership (LLP) firms with some riders.
LLP is a business structure that is between a partnership firm and a corporate body, combining the limited liability benefits of a company with the flexibility of a partnership.
The concept was notified by the government in 2009 through an Act of Parliament.
The Act allows both partner- ship firms and companies to convert to LLPs.
As of 2 May, 4,679 LLPs have been formed, government data show.
FDI in LLPs will be implemented in a calibrated manner, beginning with the open sectors where monitoring is not required, subject to certain conditions, according to a press statement issued by the government.
Accordingly, FDI in LLPs will apply in sectors where 100% FDI is allowed through the automatic route. LLPs with FDI will not be allowed to make any downstream investments. Besides, the statement said LLPs with FDI will not be al- lowed in agriculture, plantation, media and real estate businesses.
This announcement will facilitate LLPs to raise foreign funds, according to Pavan Ku- mar Vijay, managing director, Corporate Professionals group, which helps professionals and companies form and convert to LLPs through its Internet venture LLPonline.in.
“Besides, international LLPs wanting to do business in India through partnerships will get encouragement,“ Vijay said.
“This will allow several LLPs in the areas of manufacturing, IT, hospitality, consultancy, tourism etc to raise foreign direct investment.“ said Akash Gupt, executive director at audit firm PricewaterhouseCoopers.
He added that the cabinet announcement has provided another window. “It not only allows foreign investors to set up new LLPs, but also allows the restructuring of the exist- ing investments in joint ventures and wholly owned subsidiaries to convert to LLPs,“ Gupt said.
However, professionals such as chartered account- ants (CAs), company secretaries and lawyers will have to wait a while to reap the benefits.
For their partnership firms to become LLPs, the respective laws such as the chartered accountants Act or company secretaries Act have to be amend- ed. These are pending before Parliament for passage.
The amendments will not only allow chartered account- ants to form LLPs with any number of partners, but will also enable them to form multidisciplinary LLPs with cost and works accountants, company secretaries and law- yers as well as chartered engineers.
Harinderjit Singh, partner at Price Waterhouse, an audit firm affiliated to Pricewater- houseCoopers (PwC), said PwC’s advisory and tax services are currently conducted through a private limited company and its auditing services through partnership firms. “The two can function as one entity once the amendment to the CA Act is passed in the same manner as PwC functions in the US as an LLP,“ he said.
“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,“ the government said in its release.