Topic 60 LLP as Partner in LLP

THE LEGAL BRIDGE

Judiciary Examination Study Material

Topic 60

LLP as Partner in Another LLP

Permissibility Post-2021 Amendment — Section 5 & Section 2(1)(d)

Pillar 7 — Conversion to LLP (Sections 55–59 + Schedules 2–4)

Module Overview

Can an LLP be a partner in another LLP? Yes — and with express legislative clarity post-2021. Section 5 allows any "individual or body corporate" to be a partner, and Section 2(1)(d) defines body corporate to include LLPs including foreign LLPs. This topic analyses the legal basis, designated partner implications, multi-tier LLP structures, and FEMA considerations for foreign LLPs as partners.

60.1 The Legal Basis

Provision	Content	Relevance
Section 5, LLP Act	Any individual or body corporate may be a partner	The base permissive rule — "body corporate" includes LLPs
Section 2(1)(d) — pre-2021	Body corporate includes company and LLP registered under this Act	Indian LLP confirmed as body corporate eligible to be partner
Section 2(1)(d) — post-2021 Amendment	Now expressly includes foreign LLPs incorporated outside India	2021 Amendment clarified: foreign LLP can also be partner in Indian LLP
Section 7 LLP Act	Designated partners must be INDIVIDUALS	Even if LLP is a partner, it must nominate an individual as designated partner

60.2 Designated Partner Requirement When LLP is a Partner

Section 7(1) proviso: when a body corporate (including an LLP) is a partner, it must nominate an individual to act as designated partner. This nominee:

Obtains a DPIN and registers as designated partner of the investee LLP.
Exercises the LLP-partner's management rights in the investee LLP.
Signs Form 8 and Form 11 on behalf of the LLP-partner.
Bears the designated partner compliance obligations for the investee LLP.

60.3 Multi-Tier LLP Structures

The ability of an LLP to be a partner in another LLP enables multi-tier LLP structures — analogous to holding-subsidiary company structures:

Holding LLP → Operating LLP: A Holding LLP holds a majority economic interest in an Operating LLP; nominates individuals as DPs of the Operating LLP.
Investment LLP → Portfolio LLPs: A PE/VC LLP holds economic interests as a partner in multiple Operating LLPs.
Professional Network: Individual professional LLPs hold interests as partners in a master LLP that holds client relationships.

60.4 Foreign LLP as Partner — FEMA Implications

A foreign LLP as partner in an Indian LLP constitutes Foreign Direct Investment (FDI) under FEMA. Subject to:

Automatic route: FDI permitted in sectors where 100% FDI is allowed under the automatic route.
Government approval route: Sectors requiring Government approval for company FDI require same approval for LLP.
Prohibited sectors: Banking, insurance, atomic energy — foreign partners not permitted.

📌 EXAM TIP: LLP-as-partner: (1) YES — Section 5 + Section 2(1)(d); (2) Body corporate includes Indian LLP; post-2021 also expressly includes foreign LLP; (3) Designated partner must be an individual — LLP-partner must nominate one; (4) Multi-tier LLP structures are clearly permissible; (5) Foreign LLP as partner = FDI — FEMA/RBI compliance required; (6) 2021 Amendment expressly clarified foreign LLP inclusion.

Key Point	Core Content
Section 5	Any individual OR body corporate can be partner in LLP
Section 2(1)(d)	Body corporate includes Indian LLP; post-2021 also includes foreign LLP
Designated partner	Body corporate must nominate an INDIVIDUAL as designated partner
Multi-tier structure	Holding LLP → Operating LLP structures clearly permissible
Foreign LLP partner	= FDI — FEMA/RBI sectoral limits apply
2021 Amendment	Expressly included foreign LLP in body corporate definition