Can llp accept investments or loans from persons other than partners
SHABAB KARIMPANAKKAL (32 Points)
14 March 2020
loans and investment by llp
3 Replies
khushbu Shah
(10 Points)
Replied 14 March 2020
, a limited liability partnership can raise funds other than its partners. Due to higher compliances and transparency in operation, the credibility of LLP is higher and thus it eases the fund raising from financial institutions. The Reserve Bank of India notified Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Second Amendment) Regulations, 2017 (FEMA Amendment Regulations) on 3rd March, 2017 which gave LLPs an access over ECBs subject to further amendments being made in ECB framework.
Earlier, external commercial borrowings were not allowed for a limited liability partnership which meant that anyone investing in a LLP becomes a Partner of the LLP. In other words, a limited liability partnership cannot raise equity funding in LLP from any person other than its partner.
The Reserve Bank of India has decided that Limited Liability Partnership (LLP) formed and registered under the Limited Liability Partnership Act, 2008 shall be eligible to accept Foreign Direct Investment (FDI) subject to the conditions. This decision of government to allow foreign direct investment (FDI) in limited liability partnerships (LLP) has brought an improvisation in ease of doing business.
Eligibility of LLP for accepting foreign investment
(i) A LLP (existing or new) operating in sectors/activities where 100% FDI is allowed under the automatic route of FDI Scheme.
(ii) A LLP engaged in the following sectors/activities shall not be eligible to accept FDI –
a) Sectors eligible to accept 100% FDI under automatic route but are subject to FDI-linked performance related conditions
b) Sectors eligible to accept less than 100% FDI under automatic route
c) Sectors eligible to accept FDI under Government Approval route
d) Agricultural/plantation activity and print media
Eligible Investors
A person resident outside India or an entity incorporated outside India shall be eligible investor for the purpose of FDI in LLPs. Following are the persons who are not eligible to invest in LLP-
a citizen/entity of Pakistan and Bangladesh
a SEBI registered Foreign Institutional Investor
a SEBI registered Foreign Venture Capital Investor
a SEBI registered Qualified Foreign Investor
a Foreign Portfolio Investor registered in accordance with Securities and Exchange Board of India(Foreign Portfolio Investors) Regulations, 2014 (RFPI).
Under this scheme, the contribution to the capital of LLP shall be the eligible investment.
Compulsory Reporting
The LLPs which have received Foreign Direct Investment in the previous year(s) including the current year shall submit a report ‘Annual Return on Foreign Liabilities and Assets’ to the Reserve Bank of India, on or before the 15th day of July of each year, as specified by the Reserve Bank from time to time. Non-filing of the return before due date will be treated as a violation of FEMA and penalty clause may be invoked for violation of FEMA.
Earlier, external commercial borrowings were not allowed for a limited liability partnership which meant that anyone investing in a LLP becomes a Partner of the LLP. In other words, a limited liability partnership cannot raise equity funding in LLP from any person other than its partner.
The Reserve Bank of India has decided that Limited Liability Partnership (LLP) formed and registered under the Limited Liability Partnership Act, 2008 shall be eligible to accept Foreign Direct Investment (FDI) subject to the conditions. This decision of government to allow foreign direct investment (FDI) in limited liability partnerships (LLP) has brought an improvisation in ease of doing business.
Eligibility of LLP for accepting foreign investment
(i) A LLP (existing or new) operating in sectors/activities where 100% FDI is allowed under the automatic route of FDI Scheme.
(ii) A LLP engaged in the following sectors/activities shall not be eligible to accept FDI –
a) Sectors eligible to accept 100% FDI under automatic route but are subject to FDI-linked performance related conditions
b) Sectors eligible to accept less than 100% FDI under automatic route
c) Sectors eligible to accept FDI under Government Approval route
d) Agricultural/plantation activity and print media
Eligible Investors
A person resident outside India or an entity incorporated outside India shall be eligible investor for the purpose of FDI in LLPs. Following are the persons who are not eligible to invest in LLP-
a citizen/entity of Pakistan and Bangladesh
a SEBI registered Foreign Institutional Investor
a SEBI registered Foreign Venture Capital Investor
a SEBI registered Qualified Foreign Investor
a Foreign Portfolio Investor registered in accordance with Securities and Exchange Board of India(Foreign Portfolio Investors) Regulations, 2014 (RFPI).
Under this scheme, the contribution to the capital of LLP shall be the eligible investment.
Compulsory Reporting
The LLPs which have received Foreign Direct Investment in the previous year(s) including the current year shall submit a report ‘Annual Return on Foreign Liabilities and Assets’ to the Reserve Bank of India, on or before the 15th day of July of each year, as specified by the Reserve Bank from time to time. Non-filing of the return before due date will be treated as a violation of FEMA and penalty clause may be invoked for violation of FEMA.
SHABAB KARIMPANAKKAL
(32 Points)
Replied 14 March 2020
I meant resident investment ,permitted or not...? not external investment
khushbu Shah
(10 Points)
Replied 14 March 2020
There is no restriction from accepting loan from outsiders.
Read more at: https://www.caclubindia.com/forum/unsecured-loan-to-llp-298337.asp#.VTJIq-nqlxA
Read more at: https://www.caclubindia.com/forum/unsecured-loan-to-llp-298337.asp#.VTJIq-nqlxA
Recent Topics
Related Threads
Trending Online Classes
-
25 Hours GST Scrutiny of Return and Notice Handling(With Recording)
Industry Expert14 February 2025 -
Survey, Search and Seizure under Income Tax Act 1961
CA Hari Agarwal
CAclubindia
