Question

Assertion (A): A company has perpetual succession.

Reason (R): Shares of a company are transferable in the manner provided in the articles of the company.

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 a 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 a correct explanation of (A).

Explanation:

Assertion (A) is true - A company has perpetual succession, meaning it continues to exist regardless of changes in its membership.

Reason (R) is also true - Shares are transferable as per the company's Articles of Association.

However, transferability of shares is not the reason for perpetual succession. So, (R) does not explain (A).