The Department of Industrial Policy and Promotion (DIPP) has released Press Note 1 (2011 Series) (Press Note 1) allowing foreign direct investment (FDI) in limited liability partnerships (LLPs). Press Note 1 modifies circular 1 of 2011 i.e. the Consolidated Foreign Direct Investment Policy dated April 1, 2011 (FDI Policy). Changes introduced under the FDI Policy will become effective immediately.
On 11 May, the Cabinet Committee on Economic Affairs (CCEA) approved the proposal to amend the FDI Policy to permit FDI in LLPs, subject to certain conditions. Press Note 1 essentially permits FDI in LLPs on terms similar to those prescribed under the CCEA.
The CCEA permits FDI in LLPs solely through the government approval route and only in those sectors in which 100% FDI is allowed under the automatic route. In addition, approval is only granted where there are no “FDI-linked performance related conditions”. While the FDI Policy puts forward conditions in which FDI may be allowed in certain sectors, the CCEA does not provide clarity on what exactly would amount to FDI-linked performance related conditions.
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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.
