A company can forfeit its shares only when the following conditions are satisfied:
- Authority to Forfeit: The power to forfeit must be expressly given in the Articles. …
- Default in Payment of Calls: The shares can be forfeited only for the non-payment of calls and not for the default in payment of any other debts.
As we know, a company can forfeit shares on non-payment of the number of calls. The company before forfeiture must first give clear 14 days’ notice to the defaulting shareholder that he shall pay the due amount along with the interest. If not paid by the specified date, the shares shall be forfeited.
Forfeiture is withdrawal of shares due to non-payment of any call by the shareholder or for any other ground as may be provided in the Articles. On forfeiture of shares the member loses the amount paid thereon and his interest in the ownership of the shares.
If the rights to shares have been breached, then you can forfeit those shares by informing the shareholder of your intent. In circumstances such as this, the former shareholder is likely to lose all rights from the shares and is unlikely to be entitled to any amount if the forfeited shares are then sold.
Ans: When the shareholder fails to pay the full amount of share which he agreed to pay in installments, the company can forfeit his shares.
Forfeiture of shares refers to the situation where the allotment of shares is cancelled for the shareholders due to non-payment of any installments. In contrast to that, surrender of shares takes place when shareholders return the shares to the company for cancellation.
Forfeiture of shares is where the shareholder loses their entitlement to them as well as all rights under them. Shares are forfeited when a shareholder fails to meet an obligation under which the shares were issued to that person.
The notice must provide the shareholder with a minimum of 14 days to make the payment due, or his shares will be forfeited. Even after such notice if the shareholder does not pay, then the shares will be canceled. When the said shares are forfeited the shareholder ceases to be a member of the company.