As part of the new liberalised FDI norms announced recently,
the Indian government has extended the benefits enjoyed by individual NRI
investors to companies, trusts and other incorporated entities owned by
nonresident Indians (NRIs). Giving more flexibility to NRIs to decide the
structure of their investments in India, the government announced that the investment
by companies, trusts, partnerships owned and controlled by NRIs on
non-repatriation basis can now be treated as domestic investment. Companies
in the civil aviation and construction sector are expected to benefit most.
NRIs are allowed 100 per cent FDI in the civil aviation sector while in the construction sector, they are exempt from complying with minimum area requirement, exit norms and minimum FDI limit of $5 million. With the revised norms, NRIs don't have to comply with construction sector norms of a lock-in period nor take government approval for transfer of stake from one non-resident to another without repatriation of investment.
The FDI policy has also been harmonised for the Limited Liability Partnerships (LLPs), with investments in LLPs will not require government approval in sectors fully opened to investments, promoting an easier to operate. According to Mr. Akash Gupt, partner, regulatory, at advisory firm PwC, "This is a big milestone as LLPs will now be treated on par with companies. If companies don't need government approval, why should LLPs". These LLPs introduced in India through the Limited Liability Partnership Act 2008 has become a popular form of business entity in India owing to its simplified procedures for registration and maintenance. Bringing LLPs on a par with companies has also been long overdue, and the form of the Indian entity will not matter as so long as the principles underlying ownership and control are similar to the companies.