RBI should clarify if FDI is allowed in LLPs: Assocham

NEW DELHI: The Reserve Bank should clarify if foreign direct investment is allowed in limited liability partnership (LLP) form of business, industry body Assocham said today.

LLPs were not allowed to raise money through external commercial borrowings, but foreign nationals, companies and LLPs formed outside India, were eligible to become partner in an Indian LLP, Assocham said in a statement.

"It will, therefore, be in fitness of things that the RBI issues a notification under the Foreign Exchange Management Act, 1999, at the earliest clarifying that foreign direct investment is permitted in LLPs with sectoral norms and caps," Assocham secretary general DS Rawat said in a statement.

LLP is a business vehicle that allows small enterprises work like a corporate structure with limited liability while having freedom to mange their internal structure as partnership.

Assocham said LLPs should be included in the definition of non-banking financial companies if RBI wanted to regulate LLPs carrying out operations as NBFCs.

It further sought that companies should be freed of capital gains tax liability if government wants them to convert into LLPs.

As of April 3, 2012, there are about 8,651 LLPs in the country. The Limited Liability Partnership Act 2008 was notified on March 31, 2009.