Can I invest in Indian limited liability partnership? Hunt here!

    This article throws light to hold partnership in growing structure of the Limited Liability Partnership in India by Indian and foreigner nationals. 

    7th Feb 2018
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    Investment in India by NRIs and Foreign Nationals is mainly routed through Private Limited Company, along with which alternate way out is now planted in name of Limited Liability Partnership. Non-Indians can invest in LLP at any point of life cycle of Limited Liability Partnership at its incorporation or post incorporation. We hereby address the query to invest in the Limited Liability Partnership while online LLP Registration in India.

    Before talking about the investment by NRIs or foreign nationals, let’s first discuss who can be a Partner in the Limited Liability Partnership.

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    Who can be a Partner in Limited Liability Partnership?

    Limited Liability Partnership structure offers two type of partners in the firm with little difference of the responsibilities and rights. The designation of the partner shall be disclosed during online LLP Registration process and in the LLP Agreement along with the rights and liabilities of the partners. In brief, the Designated Partners are accountable for the compliance and management of the Limited Liability Partnership.

    Know the difference between a partner and a designated partner in an LLP in detail here.

    LLP Act mandates appointment of minimum 2 Designated Partners to register LLP in India. The same norm is required to be followed during the existence of the LLP.The applicable provisions do not provide distinct conditions of eligibility for both types of Partners. However, the act provides for the requirement of the Director Identification Number for the appointment as a designated partner. A body corporate can also act as a designated partner in the Limited Liability Partnership by giving an authorisation to a person holding valid DIN. The above mentioned criteria are applicable for individual having Indian citizenship.

    In same manner the foreign nationals or body corporates can hold partnership in the Limited Liability Partnership whether in form of designated partner or partner. A body corporate established and incorporated in India can also hold partnership in same manner prescribed above.

    Partnership by foreign nationals & NRIs:

    Ownership by foreigners and NRIs were already in automatic route with 100% FDI due to popularity of the organisation structure. However, the investment in LLP was restricted as the permission and approval from Government was required before implementation of the liberalised FDI regulations.

    Afterwards in order to promote their holding in Indian LLP, the Government has allowed 100% FDI in LLP through automatic route.

    After changes in FDI norms on 10th November, 2015 100% FDI under Automatic Route is allowed in permitted area without any FDI linked conditions for said investment. Henceforth, any Non Resident Indian or the foreign national is allowed to invest in LLP through appointment as partner or designated partner. There is no limit prescribed on infusion of capital by the partners or number of partners under this category.

    Procedure of incorporation:

    Alike any normal LLP, to register LLP in India, minimum 2 individual as designated partners of the LLP should be appointed. When the LLP is to be operated only through foreign or NRI holding, among minimum 2 or more designated partner, minimum 1 designated partner should be an Indian resident and citizen. The procedure of online LLP registration will be followed mutatis mutandis in five heads with additional step alike any other Limited Liability Partner of India.

    1.  Check allowable FDI for business sector;

    2.  Procurement of Digital Signature Certificate;

    3.  Obtain Director Identification Number;

    4.  Name Approval Application;

    5.  Certificate of Incorporation; and

    6.  Filing of LLP Agreement

    1. Whether FDI is allowed for proposed business activity?

    Before proceeding to register an LLP in India, it should be ensured that the business activities are allowed through foreign investment or not. Under below listed sectors, FDI is not allowed. Sectors like Atomic Energy, Nidhi Companies, Lottery and gambling activities, Chit Fund business, agricultural and plantation activities excluding certain area and manufacture of cigars or tobacco substitutes. If you want to proceed in allowed sectors, further you should ensure that under which route the FDI will fall. The FDI can be either under Automatic Route or the Approval Route. Under approval route, the partners shall require the approval of the Government or FIPB.

    2. Procurement of Digital Signature Certificate:

    For the automatic route, procuring Digital Signature Certificate will be the first step for incorporation of Limited Liability Partnership, however procurement of DSC for foreign nationals or NRI are different from the same of Indian Nationals. The documents to be furnished should be apostilled by the competent authority of the concerned country of which he is resident or holds citizenship.

    3. Obtain Director Identification Number:

    Procurement of Director Identification Number (DIN) will also be a bit different from that of an Indian. Along with the permanent resident address, the present resident address proof should also be submitted and resident status in India will also be required to be disclosed.

    At present, the application of DIN by the individual is deferred by Ministry Of Corporate Affairs due to implementation of certain changes in procedural requirements. The person to be appointed in LLP as partner will required to be wait will further announcement or completion of March, 2018.

    4. Name Approval Application:

    With the help of DIN and DSC of the designated partners, one should make an application with Ministry to reserve the name for online LLP registration. The application can be made in e-Form with submitting maximum 6 alternative unique names with their significance in order of priority. Availability and compliance of certain provisions are to be ensured before making an application. Here are pointers on what you should know before choosing the of the LLP: Choose Your LLP Name Wisely – Here are some pointers!

    The name once reserved through approval will be allotted to promoters for a period of 3 months during which one should ensure filing of online LLP registration application.

    5. Incorporation of Limited Liability Partnership:

    Application to register LLP in India will be made in LLP e-form 2 within given time, withproof of registered office address. Here, the registered office should be a place situated in India.The approval of the application will result in to issuance of Certificate of Incorporation (COI) under the seal of Registrar. The certificate will hold the date of LLP incorporation and the LLP Identification Number (LLPIN). On receipt of the COI, PAN and TAN allotment application will be required to be made within 30 days from date of incorporation.

    6. Filing of LLP Agreement:

    After issuance of COI, an Agreement entered between all the partners of the LLP should be filed with MCA. In given case of FDI, all the facts and mode of investment is advisable to be mentioned in the Agreement. Further, the duties and liabilities of all foreign, NRIs and Indian partners should be mentioned distinctly and expressly. The Agreement must be executed and filed within 30 days of date of incorporation. Further, while execution of the agreement outside India by other partners, the signed and original copy should be apostilled in manner prescribed above.

    Conclusion:

    Liberal compliance requirements of Limited Liability Partnership in comparison to Private Limited Company attract the international fund under this organisation with added benefit of flexibility in operations. With due consideration to growing opportunity under this organisation structure, the investment is welcomed by various modes. At present, it is also to be noted that due to deferment of form of Director Identification Number, registration of LLP in India is not possible till 31st March, 2018, unless 2 partners already hold DIN.

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