CA Foundation · Business Laws · The Companies Act, 2013
Neha, a member of Prime Foods Ltd, dies. Her son inherits her shares. Prime Foods Ltd's business continues without interruption. Which feature of a company does this illustrate?
This illustrates perpetual succession. A company, being an artificial legal person, continues to exist despite the death or change of its members, and ends only when it is wound up as per law. Neha's death does not affect Prime Foods Ltd.
- APerpetual successionCorrect
- BLimited liability
- CCommon seal
- DSeparate charge on assets
Explanation
A company has perpetual succession: members may come and go through death, insolvency or transfer, but the company continues until it is legally wound up. Neha's death therefore does not affect the company's existence. Limited liability concerns members' liability, not continuity of existence.
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