Worked Solution
✓ VerifiedRelevant Provision: Section 42 of the Limited Liability Partnership Act, 2008
Nature of X's Position
A has made an agreement to transfer 70% of his share in the profits of Alpha LLP to his daughter X. X is therefore a transferee of a partner's interest — she is NOT a partner of Alpha LLP. The transfer of a profit share does not, by itself, make the transferee a partner, nor does it cause dissolution of the LLP.
Rights of a Transferee under Section 42
Section 42 of the Limited Liability Partnership Act, 2008 specifically deals with the rights of a transferee of a partner's interest. The provision lays down the following:
(i) Economic Right Only: A transferee is entitled to receive, to the extent transferred, the distributions (profits) to which the transferring partner (A) would otherwise be entitled. Accordingly, X is entitled to receive 70% of A's share of profits from Alpha LLP.
(ii) No Management or Information Rights: Under Section 42(3) of the LLP Act, 2008, a transferee is not entitled to:
- Participate in the management of the LLP, or
- Have access to records or other information concerning the transactions of the LLP.
Are the Partners Correct?
Yes, the partners — A, B, C, and D — are absolutely correct in denying X access to information about the trading transactions of Alpha LLP. X's claim that she is entitled to information merely because she is to recover a percentage of profits is legally untenable. The LLP Act, 2008 expressly restricts the rights of a transferee to economic entitlements only, and specifically bars access to records and transactional information.
Remedy Available to X
X has no remedy against the LLP or its partners for denial of access to information, as such a right is not conferred upon her by law. Her only remedy lies against A (the transferring partner) — she can enforce the agreement and compel A to pay over to her the 70% of his profit share once the profits are determined and distributed. She cannot, however, compel the LLP to provide her with information directly.
Conclusion: The partners are correct in denying X access to trading transaction information. X's rights are limited solely to receiving the agreed portion of profits from A, and she has no statutory right to inspect LLP records or information under the LLP Act, 2008.
Write it like this
1The skeleton
- Name Section 42 of the LLP Act, 2008 in your very first line — examiners are scanning for the statutory hook before they read anything else, and dropping it later loses easy marks.
- Establish X's legal status as a transferee, NOT a partner — this is the pivot of the whole answer; if you don't explicitly say 'X is a transferee of a partner's interest and not a partner', your downstream reasoning looks unsupported.
- Split Section 42 into two heads: economic rights (what X gets) vs. management/information rights (what X does NOT get) — ICAI model answers always bifurcate these two limbs; writing them as one blob loses the structure marks.
- Answer both questions the examiner asked, explicitly — 'Are the partners correct?' must be answered as a direct Yes/No with a one-line statutory reason; missing this is a half-mark gift you're throwing away.
- Redirect X's remedy to A, not the LLP — this is the clincher line that separates a 4/5 from a 5/5; state that X's only remedy is to enforce the agreement against A personally to recover her 70% once profits are distributed.
2Examiner-rewarded phrases
3Common trap
The classic blunder here is treating X as if she has partner-level rights just because money is flowing to her — students either forget to cite Section 42(3) explicitly or skip the redirect-to-A remedy entirely, which is where ICAI's model answer puts its conclusion marks. Don't just say 'X has no rights'; you must say WHERE her remedy actually lies.