Rights of transferee of a partner’s interest
🔑 Rights of Transferee of a Partner’s Interest
1. Who is a Transferee?
A transferee is a person to whom a partner’s interest in the partnership (such as share in profits, capital, or goodwill) is transferred or assigned.
This can happen due to sale, gift, inheritance, or legal assignment.
2. General Principle
The interest of a partner in the partnership is transferable, but the transfer does not by itself create a partnership between the transferee and the original partners.
The transferee does not become a partner automatically unless the other partners consent.
3. Rights of the Transferee
The transferee gets only the financial interest of the partner transferred to them, but no right to participate in the management or no rights to act on behalf of the firm, unless the firm agrees to admit them as a partner.
These rights generally include:
A. Right to Share in Profits and Losses
The transferee is entitled to receive the share of profits (and losses, if applicable) that would have been payable to the transferor partner, from the date of transfer.
The transferee can also receive interest on the capital contributed by the partner (if any).
B. Right to Receive Amount on Dissolution
If the firm is dissolved or the partner retires, the transferee has the right to receive the amount payable to the partner whose interest was transferred.
C. Right to Inspect Accounts
The transferee may have the right to access the firm’s accounts or financial statements to the extent necessary to protect their interest.
4. Rights the Transferee Does NOT Have
No right to participate in management or control of the firm.
No right to bind the firm or represent it in legal or business dealings.
No right to receive notice of partnership meetings, or vote on partnership matters.
No right to inspect confidential documents beyond what is necessary for protecting financial interest.
5. Admission as Partner
To become a partner, the transferee must be consented to by all existing partners (unless the partnership deed provides otherwise).
Only after admission, the transferee can enjoy full rights and obligations of a partner.
6. Legal Reference (India - Indian Partnership Act, 1932)
Section 32:
The transfer of a partner’s interest does not entitle the transferee to participate in the management or administration of the firm.
The transferee can only claim the share of profits and losses.
7. Summary Table
| Rights of Transferee | Details |
|---|---|
| Share of profits and losses | Entitled to receive financial benefits from transfer date |
| Right on dissolution | Can claim share of capital on dissolution/retirement |
| Right to inspect accounts | Limited to protecting financial interest |
| Management rights | No right to participate or bind the firm |
| Admission as partner | Only by consent of all existing partners |
8. Example
Partner A transfers his partnership interest in profits to Mr. X.
Mr. X will get Partner A’s share of profits but cannot attend partnership meetings or bind the firm in contracts.
If Mr. X wants to become a full partner, all existing partners must agree.
Draft of a transfer deed for partner’s interest
Sample clauses from a partnership agreement about transfers
Rights of transferee in other countries or companies law
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