Question

Assertion (A): A company is a legal entity separate and distinct from its members.

Reason (R): A company can enter into a contract. It can sue and be sued in its own name.

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:

Assertion (A) is true: A company is a separate legal entity from its members.

Reason (R) is also true: Because of this separate identity, it can enter contracts and sue or be sued in its own name.

So, (R) correctly explains (A).