Question

Assertion (A): A company must have equity share capital.

Reason (R): A company may not have any preference share capital.

In the context of the above statements, which one 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, but (R) is not the correct explanation of (A).

Explanation:

A company must have equity share capital as it represents ownership and is essential. Preference share capital is optional, so a company may choose not to issue it.
But the reason doesn't explain the assertion.