April 21, 2010
NEW DELHI: Inter-ministerial consensus seems to be emerging on allowing FDI in LLPs - a new form of business structure- in sectors where 100 per
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cent overseas investment is permitted through automatic route.
The Department of Industrial Policy and Promotion (DIPP), the Department of Economic Affairs and Corporate Affairs Ministry are engaged in consultations on a policy directive on foreign direct investment (FDI) in LLPs, an official said.
LLP is a hybrid between a company and a partnership firm. As it allows unlimited number of partners with limited liability, it is expected to become popular for consulting and accountancy outfits.
"The matter is on fast track...it may be decided soon," the official told PTI.
Earlier, the DIPP had some reservations on allowing FDI through automatic route in these firms on security concerns. It had wanted the proposals to be screened by the Foreign Investment Promotion Board (FIPB).
FDI up to 100 per cent is allowed through an automatic route in a number of sectors like power generation, construction and development, telecom equipment manufacturing, Special Economic Zones and new airports.
Under the automatic route, a foreign company can invest in India without seeking prior approval from the FIPB. But the Reserve Bank needs to be informed about the inflows.
To encourage professionals to opt for LLPs, Finance Minister Pranab Mukherjee in the Budget this year proposed to exempt transfer of assets to LLP firms from capital gains tax, provided the turnover of the private or unlisted company is below Rs 60 lakh.
As of now, 1,152 LLPs have been registered in the country.
In terms of business structures, FDI is prohibited in partnership firms, but is allowed in companies subject to sectoral caps.
