RBI Allows Conditional FDI in Limited-Liability Partnerships

The Reserve Bank of India (RBI) has notified that limited-liability partnerships can accept direct investment from foreign investors, subject to certain riders.

The central bank said foreign institutional investors (FIIs), qualified foreign investors (QFIs) and foreign venture capital investors would not be eligible to invest in LLPs.

Limited-liability partnerships in all sectors where 100% FDI is permitted would be eligible to get FDI, the RBI said. However, such investments would need prior government approval.

“Any form of foreign investment in an LLP, direct or indirect (regardless of nature of ‘ownership’ or ‘control’ of an Indian company), shall require government/FIPB approval," the RBI said.

Further, an Indian company with foreign investment can make a downstream investment in a limited-liability partnership only if both the company and the partnership operate in the sectors where 100% FDI is allowed under the automatic route.

Such FDI in a limited-liability partnership, either by way of capital infusion or acquisition or transfer of ‘profit shares’, would have to be more than or equal to the fair price as worked out with any internationally accepted valuation norm, the RBI said.

Any transfer of capital contribution/profit share from a resident to a non-resident would be for a consideration equal to or more than the fair price of the capital contribution or the profit share of the partnership, RBI said.

Further, any transfer of capital contribution/profit share from a non-resident to a resident would be for a consideration which is less than or equal to the fair price of the capital contribution/profit share of the partnership.

Financial Express, New Delhi, 18-04-2014