FEMA for LLP
Raja Rajeswari S
(Querist) 12 January 2010
This query is : Resolved
Dear members,
LLP is to be started in India for exporting engineering products . A foreigner and a NRI wants invest in LLP by making 45% of the capital contribution each in LLP.The remaining capital 10% is to be contributed by Indian investor.
1) Is the investment allowed under Atuomatic route of FDI ? If so, kindly let me know the RBI notification/circular which allows Foreign investment in LLP.
2) If the investment is not possible, how can they bring in the foeign funds. they do not want to form a a pvt company? ( The Indian investor being the working partner with only 10% of capital contribution wants a share in the profit , hence he wants LLP form . If it is a company, he will be eligible only for dividend and fixed remuneration and so he doesnt prefer company form of organisation)
2) Can they repatriate the amount invested?
Kindly do clarify.
regards
RAJA RAJESWARI S
CA Adarsh Agrawal
(Expert) 28 April 2010
FEMA Regulations clearly provide that other than types entities specified therein FDI in any other entities is not allowed. A literal interpretation of the same would mean that FDI in LLP as on date is not allowed. However, in light of that fact that LLP is newly introduced legal entity it is clear that RBI did not contemplate LLP's while framing the Foreign Exchange Regulations. There are a lot of representations being made at various forums on the issue. RBI is yet to clarify the legislation on this. Untill then my then my friend you may call it yet another grey area. However, a conservative view is that FDI in LLP's is not allowed as on date.
