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Home Questions HYRD2FQTZZ
Target Exam

CUET

Subject

Business Studies

Chapter

Formation of a Company

Question:

Read the given below two statements and mark the correct answer.

Assertion (A): Article of Association is the most important document as it defines the objectives of the company.
Reason (R) :  No company can legally undertake activities that are not contained in its Memorandum of Association.

Options:

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

Assertion (A) is true but Reason (R) is False

Assertion (A) is false but Reason (R) is true

Correct Answer:

Assertion (A) is false but Reason (R) is true

Explanation:

The correct answer is option 4- Assertion (A) is false but Reason (R) is true.

Assertion (A): Article of Association is the most important document as it defines the objectives of the company. THIS IS INCORRECT as Memorandum of Association defines the objectives of the company.
Reason (R) :  No company can legally undertake activities that are not contained in its Memorandum of Association. THIS IS CORRECT.

Memorandum of Association is the most important document as it defines the objectives of the company. No company can legally undertake activities that are not contained in its Memorandum of Association. As per section 2(56) of The Companies Act, 2013 “memorandum” means the memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous company law or of this Act. The Memorandum of Association contains different clauses.

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