Foreign direct investment in new form of business, limited liability partnerships (LLPs), could be allowed without a cap, a highly placed source said.”The officials have reached a consensus for 100 per cent FDI in LLPs,” he said. Officials in the ministries of industry, finance and corporate affairs have been in regular consultations on the issue of allowing foreign direct investment (FDI) since the LLP form of business was notified in 2009.
LLP is a hybrid between a company and a partnership firm. As it allows unlimited number of partners with limited liability, it is popular for consulting and accountancy businesses.
Since it was a new form of business, there were apprehensions in certain government quarters whether allowing 100 per cent FDI could bring about security concerns.
While inter-ministerial consensus has been reached on opening LLPs to FDI, the approval may not be given through the automatic routes, the source said.
If they start investing in sensitive sectors like defence, it may create security problems,” an official said.
The government wants LLPs to gain popularity and it had allowed exemption from the capital gains tax if the transfer of assets is done from a private or unlisted company with a turnover below Rs 60 lakh.
FDI in LLPs could help make this form of business organisation more attractive. As of now, 1825 LLPs have been registered in the country.