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HindustanTimes Mon,14 Jul 2014

Foreign services firms may set shop in India

Gaurav Choudhury, Hindustan Times  New Delhi, September 03, 2007
First Published: 22:47 IST(3/9/2007) | Last Updated: 22:53 IST(3/9/2007)

Foreign Limited liability partnership (LLP) firms may soon be allowed to set up shop in India paving the way for foreign collaboration in a range of multi-disciplinary areas including financial services, information technology, venture capital, consulting and possibly legal services.

The domestic legal community, however, is opposed to the opening up of legal services to overseas entities, and the government is discussing the matter with the Bar Council.

The Limited Liability Partnership Bill, 2006, which was introduced in Parliament in December 2006, proposes to allow foreign LLPs to establish operations in India. Once the proposed legislation is enacted, it is expected to allow entrepreneurs, professionals and enterprises providing services of any kind to form commercially efficient entities. The LLP is also a suitable vehicle for small enterprises and for VC investment due to flexibility in its structure and operation.

An LLP is a corporate entity distinct from a joint stock company as well as a partnership firm. It is an alternative corporate business vehicle that gives the benefits of limited liability (where the liability is limited to the extent of the contribution made by the partners), but allows its members the flexibility of organising the internal structure of the entity as a partnership based on an agreement.

Government sources said that under the bill it is not mandatory for a foreign LLP to have an Indian partner to operate in the country. "Both foreigners and Indians are free to join LLPs belonging to each other. No specific roles are provided for Indian or foreign partners," a source said.

Sources said the government was not against prohibiting foreign direct investment (FDI) in LLPs. "The contribution made by the foreign entity may be counted towards FDI in accordance with the policy and method that might be adopted for accounting for FDI," the source added.

Besides, these entities could also be allowed to function as non-banking financial companies (NBFCs), subject to approval and regulation by the RBI, the source said. Under WTO, negotiations for which are underway, member nations may have to allow opening up of the services sector across various categories.

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