Further FDI policy easing needed to promote LLPs

The recent introduction of foreign direct investment in limited liability partnerships (LLPs) has finally ended the debate initiated in 2009, when this relatively novel concept was introduced in India. LLPs are a hybrid form of doing business, combining the features of a company and a partnership firm.

Two distinguishing features of a LLP are that the partners carry limited liability for acts of the firm and the firm possesses a separate legal personality distinct from its partners. LLPs were introduced to provide an alternative to traditional partnerships, with their unlimited personal liability, and limited liability companies, with their statute-based governance structure.

Efforts made

Since the notification of the Limited Liability Partnership Act, 2008, the LLP as a business entity has not achieved the popularity that was expected. Permitting foreign direct investment (FDI) in LLPs is an effort to confer additional benefits on this legal entity and to promote its popularity as a business and investment vehicle.

Raghubir Menon (raghubir.menon@amarchand.com) is a partner and Shubhangi Pathak (shubhangi.pathak@amarchand.com) is a senior associate designate at Amarchand & Mangaldas & Suresh A Shroff & Co. The views expressed in this article are those of the authors and do not reflect those of the firm.