Question

Assertion (A): A company has perpetual succession.

Reason (R): Insolvency or death of a shareholder will not affect its existence.

In the context of the above two statements, which of the following is correct?

Options

• Both (A) and (R) are true, but (R) is not the correct explanation of (A).

• Both (A) and (R) are true and (R) is the correct explanation of (A).

• Both (A) and (R) are false.

• (A) is false, but (R) is true.

Answer 1

Both (A) and (R) are true and (R) is the correct explanation of (A).

Explanation:

A company has perpetual succession, meaning it continues to exist regardless of changes in its members. The death or insolvency of a shareholder does not affect the company's existence. This is because the company is a separate legal entity.