FDI as capital contribution in Indian LLP
This query is : Resolved
11 May 2022
One of my client incorporated LLP having two partners with 50% share each. Now the foreigner remitted their share for capital contribution. but as per FDI norms a certificate must be produced from a CA/CS for valuation. My concern is, the LLP is newly incorporated having capital in total of Rs. 10000, are we have to produce the valuation report and if yes then what will be the methodology for the valuation. Looking for your prompt reply.
11 May 2022
As it's newly formed LLP the valuation is only capital contribution.
See the link for details.
https://taxguru.in/company-law/valuation-companies-income-tax-fema-act.html#:~:text=Under%20FEMA%20%26%20its%20Regulations.&text=The%20valuation%20shall%20be%20duly,recognized%20stock%20exchange%20in%20India.
See the link for details.
https://taxguru.in/company-law/valuation-companies-income-tax-fema-act.html#:~:text=Under%20FEMA%20%26%20its%20Regulations.&text=The%20valuation%20shall%20be%20duly,recognized%20stock%20exchange%20in%20India.
11 May 2022
Thanks for the reply.
I already went through this article. My concern is how valuation to be done for newly incorporated LLP.
Is this sufficient if we issue certificate by mentioning about total capital and the share of foreign partner i.e. total capital 10000 and share of foreign partner is 5000. We can't come out a valuation to Rs. 10000 as this is a capital to form the entity and if possible on which valuation rule basis we should go for.
I already went through this article. My concern is how valuation to be done for newly incorporated LLP.
Is this sufficient if we issue certificate by mentioning about total capital and the share of foreign partner i.e. total capital 10000 and share of foreign partner is 5000. We can't come out a valuation to Rs. 10000 as this is a capital to form the entity and if possible on which valuation rule basis we should go for.
11 May 2022
Methods of Valuation
Market Capitalization. Market capitalization is the simplest method of business valuation. ...
Times Revenue Method. ...
Earnings Multiplier. ...
Discounted Cash Flow (DCF) Method. ...
Book Value. ...
Liquidation Value.
From the above only book value is applicable here as no activity started.
The book value is only capital contribution.
Market Capitalization. Market capitalization is the simplest method of business valuation. ...
Times Revenue Method. ...
Earnings Multiplier. ...
Discounted Cash Flow (DCF) Method. ...
Book Value. ...
Liquidation Value.
From the above only book value is applicable here as no activity started.
The book value is only capital contribution.
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