There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.
Assertion (A): The liability of the member (shareholder) of a company is limited to the amount of shares owned by him.
Reason (R): Liability of a member (shareholder) is limited to the shares subscribed by him in the case of Companies with limited liability.
Answer & explanation
Correct answer: option 1
The liability of its members is limited to the extent of the nominal value of shares held by them. If a member has paid the full amount of the shares, there is no liability on his part whatsoever may be for the debts of the company. He need not pay a single paise from his private property. However, if there is any liability involved, it can be enforced during the existence of the company as well as during the winding up.