Reserve Bank of India
Foreign Exchange Department
Central Office
Mumbai- 400 001
Notification No. FEMA. 298/2014-RB
March 13, 2014
Foreign Exchange Management (Transfer or Issue of Security by a
Person Resident outside India) (Third Amendment) Regulations, 2014
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) (Third Amendment)
Regulations, 2014.
(ii) Save as expressly provided, the amendment shall be deemed to have come into
force from 20th day of May 2011.
2. Amendment to Regulation 2
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 2, after clause (vii), the
following new clause shall be inserted, namely:-
“(viiA) ‘Limited Liability Partnership (LLP)’ means a partnership formed and
registered under the Limited Liability Partnership Act, 2008.”
3. Amendment to Regulation 5
In Regulation 5, after the sub-regulation (8), the following new
sub-Regulation shall be added, namely:-
(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 registered Foreign Institutional Investor
or Foreign Venture Capital Investor or Qualified Foreign Investor registered
with SEBI or Foreign Portfolio 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.”
4. After the existing Schedule 8, new “Schedule 9” shall be added.
(Rudra Narayan Kar)
Chief General Manager-in-Charge
Foot Note:
(i) 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.______ dated ________
G.S.R.No.683(E) dated 11.10.2013
G.S.R.No.805(E) dated 30.12.2013
G.S.R.No.818(E) dated 31.12.2013
G.S.R.No.270(E) dated 07.04.2014
G.S.R.No.189(E) dated 19.03.2014
(ii) It is clarified that no person will be adversely affected as a result of
the retrospective effect being given to these regulations.
Published in the Official Gazette of Government of India –
Extraordinary – Part‐II, Section 3, Sub‐Section (i) dated 19.03.2014‐
G.S.R.No.190 (E)
Schedule 9
[See Regulation 5(9)]
Scheme for Acquisition/ Transfer by a person resident outside India of
capital contribution or profit share of Limited Liability Partnerships (LLPs)
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 or an entity incorporated outside India shall
be eligible investor for the purpose of FDI in LLPs. However, the following
persons shall not be eligible to invest in LLPs:
- a citizen/entity of Pakistan and Bangladesh or
- a SEBI registered Foreign Institutional Investor (FII) or
- a SEBI registered Foreign Venture Capital Investor (FVCI) or
- a SEBI registered Qualified Foreign Investor (QFI) or
- a Foreign Portfolio Investor registered in accordance with Securities Exchange
Board of India (Foreign Portfolio Investors) Regulations, 2014 (RFPI).
2. Eligibility of LLP for accepting foreign Investment
(i) A LLP, existing or new, operating in sectors/activities where 100% FDI is
allowed under the automatic route of FDI Scheme would be eligible to receive
FDI. For ascertaining such sectors, reference shall be made to Annex B to
Schedule 1 of
Notification No. FEMA. 20/ 2000-RB dated 3rd May 2000 as amended
from time to time.
(ii) A LLP engaged in following sectors/activities shall not be eligible to
accept (FDI):
- Sectors eligible to accept 100% FDI under automatic route but are subject to
FDI-linked performance related conditions (for example minimum capitalisation
norms applicable to 'Non-Banking Finance Companies' or 'Development of
Townships, Housing, Built-up infrastructure and Construction-development
projects', etc.); or
- Sectors eligible to accept less than 100% FDI under automatic route; or
- Sectors eligible to accept FDI under Government Approval route; or
- Agricultural/plantation activity and print media; or
- Sectors ineligible to accept FDI i.e. any sector which is prohibited under
extant FDI policy (Annex A to Schedule 1 to
Notification No. FEMA 20/ 2000-RB
dated 3rd May 2000) as well as sectors/activities prohibited in terms of
Regulation 4(b) to Notification
No. FEMA 1 / 2000-RB dated 3rd May 2000 as
amended from time to time.
3. 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
4. Entry Route
FDI in a LLP shall require prior Government/FIPB approval.
Any form of foreign investment in a LLP, direct or indirect (regardless of
nature of ‘ownership’ or ‘control’ of an Indian Company) shall require
Government/FIPB approval.
5. 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.
6. Mode of payment for an eligible investor
Payment by an eligible investor towards capital contribution of LLPs will be
allowed only by way of cash consideration to be received -
i) by way of inward remittance through normal banking channels; or
ii) by debit to NRE/FCNR(B) account of the person concerned, maintained with an
AD Category - I bank.
7. Reporting
(i) LLPs shall report to the Regional Office concerned of the Reserve Bank,
the details of the receipt of the amount of consideration for capital
contribution and ‘profit shares’ in Form FOREIGN DIRECT INVESTMENT-LLP(I) as
specified by Reserve Bank from time to time, together with a copy/ies of the
FIRC/s evidencing the receipt of the remittance along with the KYC report on the
non-resident investor, through an AD Category – I bank, and valuation
certificate (as per paragraph 4 above) as regards pricing at the earliest but
not later than 30 days from the date of receipt of the amount of consideration.
The report would be acknowledged by the Regional Office concerned, which would
allot a Unique Identification Number (UIN) for the amount reported.
(ii) The AD Category – I bank in India, receiving the remittance should
obtain a KYC report in respect of the foreign investor from the overseas bank
remitting the amount.
(iii) Disinvestment / transfer of capital contribution or profit share between a
resident and a non-resident (or vice versa) shall required to be reported within
60 days from the date of receipt of funds in Form FOREIGN DIRECT
INVESTMENT-LLP(II) as specified by Reserve Bank from time to time.
8. Downstream investment
(a) An Indian company, having foreign investment (direct or indirect,
irrespective of percentage of such foreign investment) will be permitted to make
downstream investment in an LLP only if both, the company as well as the LLP,
are operating in sectors where 100% FDI is allowed under the automatic route and
there are no FDI-linked performance related conditions. Onus shall be on the LLP
accepting investment from Indian Company registered under the provisions of the
companies Act, as applicable to ensure compliance with downstream requirement as
stated above.
b) A LLP with FDI under this scheme will not be eligible to make any
downstream investments in any entity in India.
9. Other Conditions:
- In case an LLP with FDI has a body corporate as a designated partner or
nominates an individual to act as a designated partner in accordance with the
provisions of Section 7 of the Limited Liability Partnership Act, 2008, such a
body corporate should only be a company registered in India under the provisions
of the Companies Act, as applicable and not any other body, such as an LLP or a
Trust. For such LLPs, the designated partner "resident in India", as defined
under the 'Explanation' to Section 7(1) of the Limited Liability Partnership
Act, 2008, would also have to satisfy the definition of "person resident in
India", as prescribed under Section 2(v)(i) of the Foreign Exchange Management
Act, 1999.
- The designated partners will be responsible for compliance with all the
above conditions and also liable for all penalties imposed on the LLP for their
contravention, if any.
- Conversion of a company with FDI, into an LLP, will be allowed only if the
above stipulations (except the stipulation as regards mode of payment) are met
and with the prior approval of FIPB/Government.
- LLPs shall not be permitted to avail External Commercial Borrowings (ECBs).
10. The LLP which have received foreign investment between May 20, 2011 to
the date of issuance of instructions issued in this regard by Reserve Bank shall
comply with the reporting requirement in respect of FDI within 30 or 60 days, as
applicable, from the date of issuance of these instructions.