Reserve
Bank of India
Foreign Exchange Department
Central Office
Mumbai – 400 001
Notification No.
FEMA.385/2017-RB
March
03, 2017
Foreign
Exchange Management (Transfer or Issue of Security by a Person
Resident outside India) (Second Amendment) Regulations, 2017
In exercise of the powers
conferred by clause (b) of sub-section (3) of Section 6 and Section 47 of
the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of
India hereby makes the following amendments in the Foreign Exchange
Management (Transfer or issue of Security by a Person Resident outside
India) Regulations, 2000 (Notification
No. FEMA. 20/2000-RB dated 3rd May 2000) namely:-
1. Short Title &
Commencement
(i) These Regulations may be
called the Foreign Exchange Management (Transfer or Issue of Security by a
Person Resident outside India) (Second Amendment) Regulations, 2017.
(ii) They shall come into force
from the date of their publication in the Official Gazette.
2. Amendment of the Regulations
A. In the Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident outside
India) Regulations, 2000, (Notification No. FEMA 20/2000-RB dated 3rd May
2000), in
Regulation 5, for the existing sub-regulation (9), the following shall be
substituted, namely:
“5 (9) A person resident outside
India (other than a citizen of Pakistan or Bangladesh) or an entity
incorporated outside India (other than an entity in Pakistan or
Bangladesh), not being a Foreign Portfolio Investor or Foreign
Institutional Investor or Foreign Venture Capital Investor registered in
accordance with SEBI guidelines, may contribute foreign capital either by
way of capital contribution or by way of acquisition / transfer of profit
shares in the capital structure of an LLP under Foreign Direct Investment,
subject to the terms and conditions as specified in Schedule 9”
B. Schedule 9 shall be
substituted, namely
“Schedule
9
[See
Regulation 5 (9)]
The Scheme shall be called
Foreign Direct Investment (FDI-LLP) in Limited Liability Partnerships (LLP)
formed and registered under the Limited Liability Partnership Act, 2008.
1. Eligible Investors:
A person resident outside India
(other than a citizen of Pakistan or Bangladesh) or an entity incorporated
outside India (other than an entity in Pakistan or Bangladesh), not being a
Foreign Portfolio Investor or Foreign Institutional Investor or Foreign
Venture Capital Investor registered in accordance with SEBI guidelines, may
contribute foreign capital either by way of capital contribution or by way
of acquisition / transfer of profit shares in the capital structure of an
LLP.
2. Eligible investment
Contribution to the capital of
an LLP would be an eligible investment under the scheme.
Note: Investment by way of
'profit share' will fall under the category of reinvestment of earnings
3. Eligibility of a LLP
FDI in LLPs is permitted,
subject to the following conditions:
i.
FDI is
permitted under the automatic route in LLPs operating in sectors /
activities where 100% FDI is allowed through the automatic route and there
are no FDI linked performance conditions. For ascertaining such sectors,
reference shall be made to Annex
B to Schedule 1 of these Regulations
ii.
An
Indian company or an LLP, having foreign investment, will be permitted to
make downstream investment in another company or LLP engaged in sectors in
which 100% FDI is allowed under the automatic route and there are no FDI
linked performance conditions. Onus shall be on the Indian company / LLP
accepting downstream investment to ensure compliance with the above
conditions.
iii.
FDI in
LLP is subject to the compliance of the conditions of Limited Liability
Partnership Act, 2008.
iv.
A
company having foreign investment can be converted into an LLP under the
automatic route only if it is engaged in a sector where foreign investment
up to 100 percent is permitted under automatic route and there are no FDI
linked performance conditions.
4. Pricing
FDI in a LLP either by way of
capital contribution or by way of acquisition / transfer of profit shares,
would have to be more than or equal to the fair price as worked out with
any valuation norm which is internationally accepted / adopted as per
market practice (hereinafter referred to as "fair price of capital
contribution / profit share of an LLP") and a valuation certificate to
that effect shall be issued by the Chartered Accountant or by a practicing
Cost Accountant or by an approved valuer from the panel maintained by the
Central Government.
In case of transfer of capital
contribution / profit share from a resident to a non-resident, the transfer
shall be for a consideration equal to or more than the fair price of
capital contribution / profit share of an LLP. Further, in case of transfer
of capital contribution / profit share from a non-resident to resident, the
transfer shall be for a consideration which is less than or equal to the
fair price of the capital contribution / profit share of an LLP.
5. Mode of payment
Payment by an investor towards
capital contribution in LLPs shall be made:
(i) by way of inward remittance
through banking channels; or
(ii) by debit to NRE / FCNR(B)
account of the person concerned, maintained with an AD Category - I bank in
accordance with Foreign Exchange Management (Deposit) Regulations, 2016, as
amended from time to time.
6. Reporting
(i) Reporting of foreign
investment in LLPs and disinvestment/transfer of capital contribution or
profit shares between a resident and a non-resident may be made in a manner
as prescribed by Reserve Bank of India from time to time.
(ii) All LLPs which have
received Foreign Direct Investment in the previous year(s) including the
current year shall submit to the Reserve Bank of India, on or before the
15th day of July of each year, a report titled 'Annual Return on Foreign
Liabilities and Assets' as specified by the Reserve Bank from time to
time.”
(Shekhar
Bhatnagar)
Chief General Manager-in-Charge
Foot Note:-
The Principal Regulations were
published in the Official Gazette vide G.S.R. No.406 (E) dated May 8, 2000
in Part II, Section 3, sub-Section (i) and subsequently amended as under:-
G.S.R.No. 158(E) dated
02.03.2001
G.S.R.No. 175(E) dated 13.03.2001
G.S.R.No. 182(E) dated 14.03.2001
G.S.R.No. 4(E) dated 02.01.2002
G.S.R.No. 574(E) dated 19.08.2002
G.S.R.No. 223(E) dated 18.03.2003
G.S.R.No. 225(E) dated 18.03.2003
G.S.R.No. 558(E) dated 22.07.2003
G.S.R.No. 835(E) dated 23.10.2003
G.S.R.No. 899(E) dated 22.11.2003
G.S.R.No. 12(E) dated 07.01.2004
G.S.R.No. 278(E) dated 23.04.2004
G.S.R.No. 454(E) dated 16.07.2004
G.S.R.No. 625(E) dated 21.09.2004
G.S.R.No. 799(E) dated 08.12.2004
G.S.R.No. 201(E) dated 01.04.2005
G.S.R.No. 202(E) dated 01.04.2005
G.S.R.No. 504(E) dated 25.07.2005
G.S.R.No. 505(E) dated 25.07.2005
G.S.R.No. 513(E) dated 29.07.2005
G.S.R.No. 738(E) dated 22.12.2005
G.S.R.No. 29(E) dated 19.01.2006
G.S.R.No. 413(E) dated 11.07.2006
G.S.R.No. 712(E) dated 14.11.2007
G.S.R.No. 713(E) dated 14.11.2007
G.S.R.No. 737(E) dated 29.11.2007
G.S.R.No. 575(E) dated 05.08.2008
G.S.R.No. 896(E) dated 30.12.2008
G.S.R.No. 851(E) dated 01.12.2009
G.S.R.No. 341 (E) dated 21.04.2010
G.S.R.No. 821 (E) dated 10.11.2012
G.S.R.No. 606(E) dated 03.08.2012
G.S.R.No. 795(E) dated 30.10.2012
G.S.R.No. 796(E) dated 30.10.2012
G.S.R. No. 797(E) dated 30.10.2012
G.S.R.No. 945 (E) dated 31.12.2012
G.S.R. No.946(E) dated 31.12.2012
G.S.R. No.38(E) dated 22.01.2013
G.S.R.No.515(E) dated 30.07.2013
G.S.R.No.532(E) dated 05.08.2013
G.S.R. No.341(E) dated 28.05.2013
G.S.R.No.344(E) dated 29.05.2013
G.S.R. No.195(E) dated 01.04.2013
G.S.R.No.393(E) dated 21.06.2013
G.S.R.No.591(E) dated 04.09.2013
G.S.R.No.596(E) dated 06.09.2013
G.S.R.No.597(E) dated 06.09.2013
G.S.R.No.681(E) dated 11.10.2013
G.S.R.No.682(E) dated 11.10.2013
G.S.R. No.818(E) dated 31.12.2013
G.S.R. No.805(E) dated 30.12.2013
G.S.R.No.683(E) dated 11.10.2013
G.S.R.No.189(E) dated 19.03.2014
G.S.R.No.190(E) dated 19.03.2014
G.S.R.No.270(E) dated 07.04.2014
G.S.R.No. 361 (E) dated 27.05.2014
G.S.R.No.370(E) dated 30.05.2014
G.S.R.No.371(E) dated 30.05.2014
G.S.R.No. 435 (E) dated 08.07.2014
G.S.R.No. 400 (E) dated 12.06.2014
G.S.R.No. 436 (E) dated 08.07.2014
G.S.R.No. 487 (E) dated 11.07.2014
G.S.R.No. 632 (E) dated 02.09.2014
G.S.R.No. 798 (E) dated 13.11.2014
G.S.R.No. 799 (E) dated 13.11.2014
G.S.R.No. 800 (E) dated 13.11.2014
G.S.R.No. 829 (E) dated 21.11.2014
G.S.R.No. 906(E) dated 22.12.2014
G.S.R.No. 914 (E) dated 24.12.2014
G.S.R.No. 30 (E) dated 14.01.2015
G.S.R.No. 183 (E) dated 12.03.2015
G.S.R.No. 284 (E) dated 13.04.2015
G.S.R.No. 484 (E) dated 11.06.2015
G.S.R.No. 745 (E) dated 30.09.2015
G.S.R.No. 759 (E) dated 06.10.2015
G.S.R.No. 823 (E) dated 30.10.2015
G.S.R.No. 858 (E) dated 16.11.2015
G.S.R.No. 983 (E) dated 17.12.2015
G.S.R.No. 165 (E) dated 15.02.2016
G.S.R.No. 166 (E) dated 15.02.2016
G.S.R.No. 369 (E) dated 30.03.2016
G.S.R.No. 465 (E) dated 28.04.2016
G.S.R.No. 537 (E) dated 20.05.2016
G.S.R.No. 879 (E) dated 09.09.2016
G.S.R.No. 1002 (E) dated 24.10.2016
G.S.R.No. 1003 (E) dated 24.10.2016
G.S.R.No. 1015 (E) dated 27.10.2016
G.S.R.No. 1042 (E) dated 04.11.2016
G.S.R.No 1118 (E) dated 07.12.2016
G.S.R.No 17 (E) dated 10.01.2017
Published in the Official
Gazette of Government of India – Extraordinary – Part-II, Section 3,
Sub-Section (i) dated 03.03.2017- G.S.R.No. 188(E)
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