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CMA Foundation · Fundamentals of Financial and Cost Accounting · Four Frameworks of Accounting and Forms of Organization

Which statement about a company incorporated under the Companies Act, 2013 is correct?

A company has perpetual succession: it is a separate legal entity, so the death, insolvency or exit of a shareholder does not end its existence. Its members' liability is limited, and it can own property and sue in its own name.

  1. AA private company can have a maximum of 200 members and it can invite the public to subscribe to its shares
  2. BShareholders are liable for company debts beyond the unpaid amount on their shares in a company limited by shares
  3. CThe company has perpetual succession, so death of a shareholder does not end its existenceCorrect
  4. DA company cannot own property or sue in its own name

Explanation

A company is a separate legal person with perpetual succession, so changes in its members do not affect its existence. A private company cannot invite the public to subscribe to its shares. In a company limited by shares, liability is limited to the unpaid amount on shares. A company can own property and sue in its own name.

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