Is it compulsory to reissue forfeited shares?

When all forfeited shares are not reissued?

ADVERTISEMENTS: Accounting Entries Regarding Reissue of Forfeited Shares! The forfeited shares can be reissued by the company at any price. But in no case, the amount collected on the reissue of such shares plus the amount already forfeited be less than the amount credited as paid upon reissue of shares.

What happens when shares are forfeited?

An investor loses the subscription money already paid in a case where the shares are forfeited. Hence, there are no capital gains upon forfeiture of the shares. The shares forfeited can be reissued to another shareholder at a different price by the company.

Can forfeited shares be Cancelled?

Forfeited shares are held by the company and can then be sold, re-allotted, cancelled or otherwise disposed of as the directors think fit.

What are the rules relating to reissue of forfeited shares?

These shares can be reissued at par, at premium or at discount. Generally, these shares are reissued at a discount i.e. at a price which is less than its nominal value. The amount of discount allowed at the time of reissue in no case should be more than the amount forfeited on such shares.

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How can profit on reissue of forfeited shares be treated in accounts?

When a company re-issues only a part of the forfeited shares, then it will transfer only the profit relating to this part to the capital reserve. When a company re-issues shares at a price more than their face value, it needs to transfer the excess amount to the Securities Premium A/c.

Can forfeited shares by reissued at discount if do to what extent?

The maximum amount of discount on reissue of forfeited shares is that the amount of discount allowed cannot exceed the amount that had been received on forfeited shares on their original issue and that the discount allowed on re issue of forfeited shares should be debited to the share forfeited account.

In which account profit on reissue of forfeited shares is transferred?

Answer: If the discount allowed on reissue of shares is less than the forfeited amount, there will be some balance left in the Forfeited Account, which should be transferred to capital reserve, because it is a profit of capital nature. ADVERTISEMENTS: Example: A company forfeited shares of Rs. 100 each.

Can a shareholder forfeit 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.

What are the two effects of forfeiture of shares?

(i) The name of the defaulting shareholder is removed from the register of members. It means he is no longer a shareholder of the company. (ii) The amount already paid by the defaulting shareholder is forfeited and such amount is transferred to Forfeited Shares Account.

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What is the legal effect of forfeiture?

The liability of a person whose shares have been forfeited comes to an end when the company receives the payment in full of all such money in respect of shares forfeited.

In what circumstances can a company forfeit its share?

If a shareholder, who is called upon to pay any call fails to pay the amount, even after sending several reminders, the company may forfeit his shares. Forfeiture of shares results in a permanent reduction of the share capital.

Can fully paid shares be forfeited?

The main reason for forfeiture is where a call payment has been requested by the company on unpaid (or partly paid) shares and the shareholder has failed to pay the amount due.