Wednesday, October 14, 2009

FDI Guidelines to Apply to LLPs

Several posts here have discussed the introduction of the concept of Limited Liability Partnerships (“LLPs”) in India, and its treatment under the Indian legal regime. In another interesting development, the Government is now planning to bring LLPs into the scope of the FDI regime, in order the streamline the establishment of cross-border LLPs. LLPs are structurally more similar to corporate entities than to partnerships, making the applicability of FDI guidelines apposite. The concept of cross-border LLPs is envisaged under the LLP Act, but the guidelines for calculating FDI apply only to companies. The relevant provision is section 59, which reads-

The Central Government may make rules for provisions in relation to establishment of place of business by foreign limited liability partnerships within India and carrying on their business therein by applying or incorporating, with such modifications, as appear appropriate the provisions of the Companies Act, 1956 or such regulatory mechanism with such composition as may be prescribed.

This change, expected to be effected over the next few months, will provide further emphasis to the establishment of larger LLPs, with foreign participation. Another discussion on the proposal is found here.

1 comment:

Lawman said...

Does that mean a foreign investor will be able to invest/buy stake in an Indian law firm which is run as a LLP?

Given that the government has conceded to the industry’s concerns in permitting foreign law firms to open shops in India, foreign law firms (either by itself or through investment companies) would find it worthwhile to take exposure in the Indian legal market by investing in the medium and large size law firms. This funding will also give the investee firm financial muscle to compete with top tier law firms.

Comments are welcome.

Warm Regards,