Can a foreigner be a partner in newly constituting firm.

Hello All,

 

One of my clients isinterested in setting up a partnership firm for some business in service sector. He wanted to know whether his counterpart in UK who is a British Citizen can be a partner in this firm. I am a bit confused. So thought of asking the experts' panel. Could any one throw some light into this, please?

Replies (3)
Quick Summary
This discussion explores whether a foreign national, specifically a British citizen, can be a partner in a newly formed partnership firm in India. Generally, foreigners require specific permission under the Foreign Exchange Management Act (FEMA) to conduct business in India. The Indian Partnership Act 1932 also outlines certain individuals, such as minors, those of unsound mind, or insolvent individuals, who are ineligible to be partners.

According to the Indian Partnership Act 1932, the following individuals cannot be partners in a partnership firm in India:

  • Minors (individuals under the age of 18)
  • Persons of unsound mind
  • Insolvent individuals
  • Individuals who have been disqualified by law from entering into a partnership
  • Foreigners are not authorized to do business in India unless the partnership is specifically permitted by the Foreign Exchange Management Act (FEMA).
  • Companies or other legal entities cannot enter into a partnership by their governing documents.

Nahi videshi vyakti farm ka sajhedar nahi ban sakta 

Depends on who the foreigner is:

• FEMA (Non-debt Instruments) Rules 2019: investment in a partnership firm or proprietary concern by a person resident outside India is allowed only for NRIs or OCIs on a non-repatriation basis (Schedule IV), subject to sector restrictions (no agricultural, plantation or real estate business, print media).

• A foreign national who isn't an NRI or OCI needs prior RBI approval to contribute capital to an Indian partnership firm. In practice, RBI rarely grants this. The usual route is an LLP (FDI permitted under the automatic route where 100% FDI is allowed without conditions) or a company.

• The Partnership Act doesn't bar foreigners, but FEMA controls capital contribution and profit repatriation.

• So for a service-sector business with a foreign partner, form an LLP or private company, and report the FDI (FDI-LLP(I) / FC-GPR).

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