Assignment and Transfer of Partnership Rights [Section 42]

A partner in an LLP needs money urgently for his daughter's admission fees. He cannot withdraw capital without the others agreeing, so he offers to hand his share of future profits to a moneylender as security. Has the moneylender become a partner? Can he walk into the office on Monday and read the books? And does the LLP collapse because one partner has parted with his rights? Section 42 of the LLP Act answers all three, and every answer is no.

In two minutes

A partner's right to his share of profits and losses and to distributions can be transferred, wholly or in part, but the transfer does not make the transferee a partner, does not dissolve the LLP, and gives no right to manage or to see the LLP's transactions.

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