Limited Liability Partnership or LLP was introduced by Indian government though Limited Liability Partnership Act, 2008. LLP is an entity structure which is a mixture of private limited company and a partnership firm. But unlike the latter it is a separate legal entity and limits the liability of its partners.
The LLP Act 2008 allows foreign national and foreign LLP’s to become partner in LLP but as per Foreign Exchange Management Act, 1999 and rules and regulations made thereunder, FDI in LLP was not allowed. In the year 2011 the regulatory policy for FDI was amended and 100% FDI was allowed in LLPs, but prior approval of Government was needed for it.
The Government of India has further reviewed the FDI policy on 10th November, 2015 where additional changes w.r.t. FDI in LLPs was introduced. The changes are as follows:
The FDI Policy has further subjected the following conditions to downstream investments by Indian LLPs:
Allowing FDI in LLP is a welcome move of the Government of India, as it would provide foreign investors an alternate form of business other than company and would entitle them to benefit with inherent flexibility & tax efficient LLP structure.