Question

Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R).

Assertion (A) - If a shareholder fails to pay a share claim on one or more calls, the company may forfeit the shares after giving due notice.

Reason (R) - The shareholder is liable to the extent of the unpaid value of shares he/she has subscribed for.

[0.88 marks]

• A. Both A and R are true, and R is the correct explanation of A.
• B. Both A and R are true, but R is not the correct explanation of A.
• C. A is true, but R is false.
• D. A is false, but R is true.

Answer 1

The correct option is A Both A and R are true, and R is the correct explanation of A.

Some shareholders might fail to pay instalments, i.e the allocation money or call money. In such a scenario, their share is forfeited, which means that the shareholder’s share is cancelled after the due notice is given.