Section 42 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 42 says what a partner can transfer and what the person who receives it does not get. A partner's rights to a share of the profits and losses and to distributions can be transferred, wholly or in part. The transfer does not make the transferee a partner, does not end the transferor's membership, and does not give the transferee a say in running the LLP. If you are planning a transfer or want to change who is in the LLP, our changes in LLP agreement service can structure it properly.
The rights of a partner to a share of the profits and losses of the LLP and to receive distributions in accordance with the LLP agreement are transferable, either wholly or in part (s.42(1)). A transfer does not by itself cause the disassociation of the partner or a dissolution and winding up of the LLP (s.42(2)). It does not by itself entitle the transferee or assignee to participate in the management or conduct of the activities of the LLP, or to access information about its transactions (s.42(3)).
Section 42(1): what can be transferred
The section names two rights:
| Right | Description in the text |
|---|---|
| Share of profits and losses | The partner's right to a share of the profits and losses of the LLP |
| Distributions | The partner's right to receive distributions in accordance with the LLP agreement |
Both are transferable "either wholly or in part". So a partner may transfer the whole of these rights or a fraction of them.
Note what the sub-section does not list. It does not say that management rights, voting rights or the status of partner are transferable. Only the economic rights are named. Entry as a partner is dealt with in section 5 and section 25.
The words "in accordance with the limited liability partnership agreement" tie the distribution right to the agreement. If the agreement restricts a transfer, the section's text does not say whether the restriction prevails, so read the agreement, and take advice. Our article on LLP agreement clauses shows where such a term fits.
Section 42(2): the transferor stays a partner
"The transfer of any right by any partner pursuant to sub-section (1) does not by itself cause the disassociation of the partner or a dissolution and winding up of the limited liability partnership."
Two protections follow:
- The transferor remains a partner. Transferring the economic rights, wholly or in part, does not by itself end his partnership. Cessation is governed by section 24.
- The LLP continues. The transfer does not by itself dissolve or wind up the LLP.
The words "by itself" are important. They mean the transfer, on its own, has these results. If the LLP agreement says that a transfer triggers cessation, or if other events happen, the section does not say the consequences are excluded.
Section 42(3): the transferee's limits
The transfer "does not, by itself, entitle the transferee or assignee to":
- participate in the management or conduct of the activities of the LLP; or
- access information concerning the transactions of the LLP.
So the transferee holds the economic right but has no voice and no information right under this section. The text does not give the transferee a right to inspect books or attend meetings. Whether the LLP agreement gives him any, the Act does not say.
Example. Sunita Jain and Harsh Mehta are partners in Jain Mehta Advisory LLP, sharing profits equally. Harsh assigns half of his profit share and distribution rights to his brother Tarun. Under s.42(1) the assignment is permitted. Under s.42(2) Harsh remains a partner and the LLP continues. Under s.42(3) Tarun cannot take part in running the LLP and cannot demand to see its transactions on the strength of the assignment alone. Tarun receives only the share of distributions that was assigned to him.
Comparison with the partnership position
In an ordinary partnership under the 1932 Act, the transfer of a partner's interest is dealt with in section 29. The LLP Act has its own rule, and the Indian Partnership Act does not apply to LLPs unless the Act says so (section 4). For the partnership position see section 29 of the Indian Partnership Act, and for the relationship between the two Acts, see non-applicability of the Indian Partnership Act to LLPs. The LLP Act's own words control.
What section 42 does not cover
- It does not make the transferee a partner. Becoming a partner is a separate step governed by the Act and the LLP agreement.
- It does not say how a transfer is documented, stamped or reported. The text is silent on these.
- It does not say whether a transfer must be intimated to the Registrar. Changes in the names of partners are filed under section 25; a transfer of economic rights alone does not by its wording change the partners.
- It says nothing about tax. See our income-tax guides.
Practical points
- Put a transfer clause in the LLP agreement: whether consent is needed, how the transferee's share is valued and what information, if any, the transferee may receive.
- Record any assignment in writing, with the exact rights transferred and the portion.
- Tell the transferee clearly that no management or information right arises from the assignment alone.
- If the intention is to bring in a new partner, use the admission route, not an assignment.
Need help structuring a transfer?
Whether you want to assign profit rights, bring in a new partner or restructure contributions, the LLP agreement should say how. Our changes in LLP agreement service can draft the clause or the amendment and file what needs filing.
Key takeaways
- A partner's rights to a share of profits and losses and to distributions are transferable, wholly or in part (s.42(1)).
- A transfer does not by itself make the partner cease to be a partner or dissolve the LLP (s.42(2)).
- The transferee gets no right to take part in management or to access information by reason of the transfer alone (s.42(3)).
- The section is silent on documentation, consent and filing.
Read next
- Section 41: enforcing returns
- Section 43: investigation of the affairs of an LLP
- Rights and duties of partners in an LLP
- LLP agreement clauses explained
Disclaimer: Based on the Limited Liability Partnership Act, 2008 as amended by the Limited Liability Partnership (Amendment) Act, 2021, as consulted on 1 October 2026. Forms, fees and procedure are set by the LLP Rules, 2009 as amended from time to time. This article is general information, not legal advice; check the official text before acting.