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Catering Solutions Ltd. provided catering services at short notice to the business community. Andrew was the sole shareholder. The company operated well and made reasonable profits. It also borrowed money and had some trade creditors. Andrew died leaving one son. He had made no will.
Which of the following statements best describes the legal position with regards to the company?
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One of the benefits of the corporate form is perpetual succession, meaning that the company continues to exist regardless of the death, bankruptcy, or insanity of any or all of the shareholders. Option C is incorrect, as neither the business nor the shares of the company will automatically pass to the beneficiaries. When a member of the company dies, the right to his interest in the shares will pass to his beneficiaries under his will or intestacy. The rights of the deceased member will be administered by his personal representative and will be subject to the provisions of the company's articles of association.
Key Point: The principle of perpetual succession ensures that a company maintains its existence despite changes in ownership or the personal circumstances of its shareholders. This provides stability and continuity for the company's operations.
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