If, as a Limited Liability Partnership registered under the Limited Liability Partnership Registration Act of 2008, you want to invite Foreign Direct Investment in your Partnership, then you must conform to the Non-Debt Instruments Rules of the Foreign Exchange Management Act of 2019. The Ministry of Finance (Department of Economic Affairs) issued the rules which superseded the Non-Resident Indian Security Issue Transfer regulations of the Foreign Exchange Management Act.
Who can contribute FDIs in a Limited Liability Partnership?
The RBI authorizes the following entities to transfer funds in a registered Limited Liability Partnership:
Individual Resident outside India (Cannot be a citizen of Pakistan or Bangladesh)
Entity Incorporated outside India (Entity cannot be registered in Pakistan or Bangladesh)
Also, The RBi restricts the following entities from transferring funds to an LLP:
Foreign Portfolio Investor
Foreign Institutional Investor
Foreign Venture Capital Investor registered as per the SEBI guidelines
The Foreign Direct Investment in an LLP is subject to the terms and conditions specified in the LLP Act.
Eligible Investments in an LLP:
Any contribution to the capital of an LLP is an eligible investment. However, If a foreign establishment invests in the LLP by way of profit share, then the capital will fall under the reinvestment of earnings.
What makes a Limited Liability Partnership eligible for FDI?
An LLP can access funds from a Foreign Entity in the form of an FDI as per the following conditions:
FDI through Automatic Routes
The RBI permits the FDI through the automatic route in LLPs operating in sectors and their activities. Here, The RBI permits 100% FDI through the automatic route. The Bank permits no FDI-linked performance conditions.
The RBI permits an LLP with foreign investment to make downstream investments in another. Such LLPs must be engaged in sectors with 100% FDI allowed under the automatic route. Also, there must be no FDI-linked performance conditions. The onus will be on the LLP to accept downstream investment to ensure compliance with the above conditions.
The FDI in an LLP is subject to compliance with the Limited Liability Partnership Act of 2008. A Foreign Investment Company can be converted into an LLP under the automatic route. But it can happen only if it is engaged in a sector where the RBI permits the FDI upto 100% under the automatic route, and there are no FDI-linked performance conditions.
Modes of FDI Payment
The Investor must make the payment investor towards capital contribution in the LLP by the following methods:
Inward Remittance through Banking Channels
Debit to NRE / FCNR
Person's Account maintained with an AD Category – Bank. The person must maintain his Account under the Foreign Exchange Management (Deposit) Regulations of 2016.
Limited Liability Partnership Compliances related to the FDI
Every LLP must submit the Annual Return on Foreign Liabilities and Assets. If an LLP has previously received investment by capital contribution, then it must submit the following forms to the Reserve Bank before July 15 every year:
Form FDI- LLP (I)
Every Limited Liability Partnerships must, after receiving the amount for capital contribution and profit shares acquisition, submit the Form Foreign Direct Investment-LLP (I) within 30 days from the date of receipt of such consideration.
Still confused? … Seek Help
Suppose you have the required Investors from the Foreign Land who are willing fund your
Limited Liability Partnership but you don't have any idea on how to access those funds. In that
case, you can connect with Registrationwala. Our Incorporation Team will get in touch with you
as soon as you register your details on our website. The Team will quash all your doubts
regarding the FDI investment in your LLP and detail the procedure of applying for the FDI with
Registrationwala can also assist you in your business's Online LLP registration process if you
haven't set up your Partnership arrangement as an LLP.