FDI in LLP

Reserve Bank of India (RBI) regulates foreign investment in Limited Liability Partnership (LLP). Person resident Outside India can make investment by way of contribution to capital/profit share in LLP subject to compliance with FEMA provisions. The Highlights of said provisions are given below

I. Eligibility of LLP:

• An LLP engaged in 100% Automatic sectors (not being subject to FDI-linked performance related conditions) is eligible to receive Foreign Direct Investmentfrom person resident outside India on a repatriable basis.

• An LLP subject to provisions of Schedule 4 is eligible to receive capital contributionfrom Non-resident Indian (NRI) or Overseas Citizen of India (OCI) on non- repatriable basis

II. Mode of payment:

FDI in LLP shall be only by way of cash consideration received by way of-

In case of Capital Contribution under Schedule 4-

• Inward remittance from abroad through banking channels or

• Out of funds held in NRE/ FCNR(B)/ NRO account maintained with an AD Category - I bank

In case of profit share under Schedule 6-

• Inward remittance through normal banking channels.

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

III. Pricing:

Foreign Direct Investment in an LLP either by way of capital contribution or by way of acquisition/ transfer of profit shares, should not be less than the fair price worked out as per any

Notification No. FEMA 20(R)/ 2017-RB ( FDI Regulations dated 7th November 2017)

Investment by way of ‘profit share’ will fall under the category of reinvestment of earnings.

valuation norm which is internationally accepted and a valuation certificate to that effect shall be issued by the Chartered Accountant or by a practicing Cost Accountant or by an approved valuer from the panel maintained by the Central Government.

IV. Reporting:

a) A Limited Liability Partnerships (LLPs) receiving amount of consideration for capital contribution and acquisition of profit shares is required to submit a report in Form Foreign Direct Investment-LLP (I)within 30 days from the date of receipt of the amount of consideration.

b) Disinvestment / transfer of capital contribution or profit 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) There are no reporting requirements if the investment from NRI/OCI is received under Schedule 4.