1. Can a foreign national be appointed as a director in a property related company?
2. Whether LLP can become a shareholder of the above mentioned property related company? where the foreign national is holding majority of shares in LLP
01 March 2012
There is no restriction for a foreign national to become a director in a company where main object is dealing with property related issues. thanks,
01 March 2012
DCA Circular dated 16-2-1995 clarifies that there can not be any restriction for incorporation of a company whether all the subscriber to the MOA/AOA/ proposed directors are residing abroad, being either foreign nationals, or NRI subject to the approval of RBI, where necessary.
The RBI may issue such a general permission also under FEMA, 1999 also. The FEMA(Permissible Capital Account Transactions) Regulations, 2000 allow persons resident outside India to invest in an issue of security by body corporate or an entity in India.
01 March 2012
Mr. Siddhartha and Mr. Ajay, thanks for your reply on my query.
Can you clarify on the below relating to FDI in LLP?
FDI in Limited Liability Partnerships (LLPs): FDI in LLPs is permitted, subject to the following conditions: (a) FDI in LLPs will be allowed, through the Government approval route, only for LLPs operating in sectors/activities where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance related conditions (such as 'Non Banking Finance Companies' or 'Development of Townships, Housing, Built-up infrastructure and Construction-development projects' etc.). (b) LLPs with FDI will not be allowed to operate in agricultural/plantation activity, print media or real estate business. (c) An Indian company, having FDI, will be permitted to make downstream investment in an LLP only if both-the company, as well as the LLP- are operating in sectors where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance related conditions. (d) LLPs with FDI will not be eligible to make any downstream investments. (e) Foreign Capital participation in the capital structure of LLPs will be allowed only by way of cash consideration, received by inward remittance, through normal banking channels or by debit to NRE/FCNR account of the person concerned, maintained with an authorized dealer/authorized bank. (f) Investment in LLPs by Foreign Institutional Investors (FIls) and Foreign Venture Capital Investors (FVCIs) will not be permitted. LLPs will also not be permitted to avail External Commercial Borrowings (ECBs). (g) In case the LLP with FDI has a body corporate that is a designated partner or nominates an individual to act as a designated partner in accordance with the provisions of Section 7 of the LLP Act, 2008, such a body corporate should only be a company registered in India under the Companies Act, 1956 and not any other body, such as an LLP or a trust. (h) For such LLPs, the designated partner "resident in India", as defined under the 'Explanation'to Section 7(1) of the LLP Act, 2008, would also have to satisfy the definition of "person resident in India", as prescribed under Section 2(v)(i) of the Foreign Exchange Management Act, 1999. (i) The designated partners will be responsible for compliance with all the above conditions and also liable for all penalties imposed on the LLP for their contravention, if any. (j) Conversion of a company with FDI, into an LLP, will be allowed only if the above stipulations are met and with the prior approval of FIPB/Govemment. (C) Renumbering of the present paragraph 3.3.5, as paragraph 3.3.6: The present paragraph 3.3.5 is renumbered as paragraph 3.3.6, to read as below: "3.3.6 FDI in other Entities: FDI in resident entities, other than those mentioned above, is not permitted." 3.0 The above decision will take immediate effect. 4.0 The above provisions will be incorporated in the next Circular on Consolidated FDI Policy to be issued on 30.09.2011.
I have found the above notification relating to LLP pertaining to FDI and below is the subject of its notification.
Subject: Review of the policy on Foreign Direct Investment- Allowing FDI in Limited Liability Partnership firms-amendment to paragraphs 2.1, 3.3.5 and 3.3.6 of 'Circular I of 2011-Consolidated FDI Policy'
(i) Foreign investment in any form is prohibited in a company or a partnership firm or a proprietary concern or any entity, whether incorporated or not Website :www.fema.rbi.org.in 3 Email : fedcofid@rb i.org.in (such as, Trusts) which is engaged or proposes to engage in the following activities2: (a) Business of chit fund, or (b) Nidhi company, or (c) Agricultural or plantation activities, or (d) Real estate business, or construction of farm houses, or (e) Trading in Transferable Development Rights (TDRs).
(ii) It is clarified that “real estate business” does not include development of townships, construction of residential / commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships. It is further clarified that partnership firms /proprietorship concerns having investments as per FEMA regulations are not allowed to engage in print media sector.
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