## Section 42 — Partner's Transferable Interest

### Sub-section (1) — What is Transferable

The rights of a partner to:

A share of profits and losses of the LLP, AND
Receive distributions as per the LLP agreement,

are transferable either wholly or in part.

### Sub-section (2) — What Transfer Does NOT Do

A transfer of such rights by itself does not:

Cause disassociation of the partner from the LLP
Cause dissolution or winding up of the LLP
Entitle the transferee to:
Participate in management of the LLP, OR
Access information concerning LLP transactions

### Practical Effect

A partner can monetise his economic interest without disturbing the structure of the LLP. The transferee is merely a passive recipient of distributions — never a partner.

Worked example

### Example 1

Example: Mr. T, partner in JKL LLP, transfers 50% of his right to profits to his son. Does the son become a partner with voting rights?

Answer: No. Under Section 42(2), transferee receives only the economic right; he does NOT get management rights or access to LLP information.

### Example 2

Example: Mr. T transfers his entire interest. Does the LLP dissolve?

Answer: No. The LLP continues. Section 42(2) explicitly says transfer does not cause disassociation or dissolution by itself.

⚠️ Common exam mistakes

Confusing economic transfer with admission of a new partner.
Believing transferee automatically gets voting/management rights.
Treating transfer as a ground for automatic dissolution of the LLP.

Reference: Section 42 — Limited Liability Partnership Act, 2008

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →

Partner's Transferable Interest (Section 42)

Worked example

⚠️ Common exam mistakes