India to Reform Limited Liability Partnerships

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Jul. 30 – The Indian Department of Industrial Policy & Promotion (DIPP), by way of a note it first issued last May, has requested that the Reserve Bank of India (RBI) urgently notify them of their proposed financial guidelines regarding the permittance of foreign-invested limited liability partnerships (LLPs) in the country.

To date, the Indian government has mandated that LLPs are to be permitted in sectors where 100 percent FDI is allowed and that such an arrangement could be completed under the automatic route. The RBI, however, has dragged its heels over the issue and still requires examination of every single application – something that the automatic route seeks to abolish.

There are other issues that also still need to be worked out, such as the issue regarding foreign-invested LLPs currently not being allowed to operate in India’s agriculture, plantation, print media or real estate sectors. Foreign-invested LLPs also currently cannot make downstream payments. Furthermore, foreign institutional investors and venture capital firms are currently not allowed to invest in LLPs either – thereby restricting the very entrepreneurial business activities that they are supposed to invest in.

The DIPP’s move should help unravel some of these issues, and we will update our readers on this subject when the situation becomes clearer.

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