State which of the following combination of statements are true about the Company?
(A) A company is an artificial person.
(B) Capital reserves are created from capital profits.
(C) Shareholders of a company are liable for the acts of the company.
(D) A company's shares are generally transferable.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A), (B) and (D) only
A company is an association of persons formed under the Companies Act, with a legal existence of its own apart from its members.
(A) A company is an artificial person. Correct. It is created by law; it cannot sign by itself and acts through its directors and its common seal.
(B) Capital reserves are created from capital profits. Correct. Profits of a capital nature, such as the profit on reissue of forfeited shares, are kept in capital reserve and not distributed as dividend.
(C) Shareholders of a company are liable for the acts of the company. Incorrect. The company is a separate legal entity; it sues and is sued in its own name, and a member’s liability is limited to the unpaid amount on his shares.
(D) A company’s shares are generally transferable. Correct. The shares of a public company are freely transferable, without the consent of other members.
NCERT (2026-27 edition):
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