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CMA Intermediate · Financial Accounting · Accounting of Limited Liability Partnership

Under section 42 of the LLP Act 2008, a partner transfers part of his right to a share of profits to an outsider. What is the effect of this transfer?

The transfer neither makes the partner cease to be a partner nor dissolves the LLP. The transferee receives only the economic right transferred and is not entitled to participate in management or conduct of activities, nor to access information about the LLP's transactions, under section 42.

  1. AThe transferor ceases to be a partner and the LLP is dissolved
  2. BThe transferee becomes entitled to take part in the management of the LLP
  3. CThe transfer does not by itself cause disassociation of the partner or dissolution of the LLP, and does not entitle the transferee to participate in managementCorrect
  4. DThe transferee gains the right to access information about LLP transactions

Explanation

Section 42(1) makes the right to a share of profits and losses and distributions transferable wholly or in part. Section 42(2) states that the transfer does not by itself cause disassociation or dissolution. Section 42(3) states that it does not entitle the transferee to participate in management or access information on the transactions.

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