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CA Foundation · Business Laws · The Limited Liability Partnership Act, 2008

Seema holds 30% of the profit share in Zenith Foods LLP, which has 5 partners. She wants to transfer her entire interest to an outsider, Dev, and claims Dev becomes a partner automatically. Under the LLP Act, 2008, what is the position?

A transfer of a partner's profit share does not make the transferee a partner and does not dissolve the LLP. Dev would only be entitled to receive the share of profits transferred, without any right to manage or take part in the LLP.

  1. ATransfer of a partner's right to share in profits does not by itself make the transferee a partner, and it does not affect the LLP's existenceCorrect
  2. BDev becomes a partner immediately as the transfer was made by a partner
  3. CThe LLP stands dissolved because a partner has transferred her interest
  4. DThe transfer is void and no rights can ever be transferred

Explanation

The Act allows a partner's rights to share profits and losses to be transferred wholly or partly, but the transferee does not become a partner. The transferee gets only the right to receive the share of profits. The transfer also does not dissolve the LLP.

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