Section 42 of LLP Act, 2008 : Section 42: Partner'S Transferable Interest

Explanation using Example

Imagine that Raj is a partner in an LLP called "Tech Innovations LLP," which specializes in developing software. According to their LLP agreement, Raj is entitled to a 25% share of the profits. Raj needs liquidity for a personal matter and decides to transfer 10% of his profit share to his friend, Priya.

As per Section 42(1) of the Limited Liability Partnership Act, 2008, Raj can transfer this share of the profits to Priya, and the agreement between Raj and Priya would dictate the terms of this transfer.

Despite this transfer, as per Section 42(2), Raj remains a partner in "Tech Innovations LLP" and the LLP continues its business as usual without any requirement of dissolution or winding up.

However, according to Section 42(3), Priya, now holding a 10% profit share, does not gain the right to participate in the management of the LLP or access its confidential business information solely because of this transfer.