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Government allows FDI in LLP firms

In a move that will help in attracting more foreign investment, the government today allowed FDI in Limited Liability Partnership (LLP) firms in sectors like mining, power and airports.

May 12, 2011 / 05:33 PM IST

In a move that will help in attracting more foreign investment, the government today allowed FDI in Limited Liability Partnership (LLP) firms in sectors like mining, power and airports.


LLPs with FDI, however, will not be allowed to operate in agricultural and plantation activity, print media or real estate business.


The Cabinet Committee on Economic Affairs (CCEA), which cleared the proposal, however, said a prior approval of the government (Foreign Investment Promotion Board) will be required for bringing in FDI in LLPs.


LLP is a new business structure that has hybrid features of a partnership firm and a corporate body -- a company''s limited liability and the flexibility of a partnership firm.


The LLP Act, 2008, was notified in April, 2009. As on May 2, as many as 4,679 LLPs were registered with the Ministry of Corporate Affairs.


"The FDI in LLPs will be implemented in a calibrated manner, beginning with the ''open'' sectors where monitoring is not required," an official statement said.


LLPs with FDI will be allowed through the government approval route, in sectors or activities where 100% FDI is allowed through the automatic route and there are no FDI-linked performance related conditions.


The government further said foreign institutional investors (Flls) and foreign venture capital investors (FVCIs) will not be permitted to invest in LLPs. LLPs will also not be permitted to avail External Commercial Borrowings (ECBs).


Besides, LLPs with FDI will not be eligible to make any downstream 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," the statement said.

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