Rules and Regulations regarding Investment in Limited Liability Partnership (LLP)

Limited Liability Partnerships (LLP) introduced in India through the Limited Liability Partnership Act 2008 has become a popular form of business entity in India owing to its simplified procedures for registration and maintenance.

LLPs allow many of the small and medium-sized to enjoy a separate legal entity, improve transferability and provide its promoters with limited liability protection. Therefore, there is tremendous interest among small business owners and service providers to register their business as an LLP.

In this article, we look at the regulations and procedures for Investment in LLP.

Investments by LLP

LLP can invest in a Private Limited company/ Public company and become a shareholder of that company.

Investments in LLP

A person resident outside India (other than a citizen of Pakistan or Bangladesh) or an entity incorporated outside India (other than an entity in Pakistan or Bangladesh), may contribute foreign capital either by way of capital contribution or by way of acquisition/transfer of profit shares in the capital structure of an LLP.

However, Foreign Portfolio Investor or Foreign Institutional Investor or Foreign Venture Capital Investor registered in accordance with SEBI guidelines are not eligible to contribute foreign capital in the LLP.

Foreign nationals can invest in an LLP without the permission of the government. 100% FDI is now permitted under the automatic route in LLPs operating in sectors/activities where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance conditions.

An Indian Company, having FDI, will be permitted to make downstream investment in LLPs only if both the company, as well as the LLP is operating in sectors where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance-related conditions.

FDI is not allowed for the following sectors:

– Atomic Energy,
– Nidhi Companies,
– Lottery and gambling activities,
– Chit Fund business,
– Agricultural and plantation activities excluding certain areas and manufacture of cigars or tobacco substitutes.

Can an LLP take a loan or Cash credit…??

Yes, an LLP can take a loan or cash credit from the bank & as well as from outsiders.

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