You asked: What happens when shares are forfeited?

What does forfeiture mean on shares?

If a shareholder fails in their obligations then they could lose their entitlement to the shares they own. This is known as forfeiture of shares.

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.

Why do companies forfeit their shares?

So the non-payment of call on shares amounts to a breach of contract by the shareholder, and therefore as per the terms and conditions of the issue of shares and after allowing the shareholder prescribed time and opportunity, if he still fails to pay the money due, the company can forfeit the shares of that shareholder …

When shares are forfeited share forfeited A is?

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.

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What is the legal effect of forfeiture of shares?

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. – A member is liable for unpaid calls even after the forfeiture of shares.

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.

What is meant by issue of shares for consideration other than cash?

When an asset is acquired by a company, the payment of asset price can be made by the issue of shares or in cash to the vendor. Moreover, when shares are given against the purchase price, it is known as ‘Issue of shares for consideration other than cash’. In this case, shares are not open to the general public.

What do you mean by share capital of a company?

Share capital is the money a company raises by issuing common or preferred stock. … It means the total amount raised by the company in sales of shares.

When can a company forfeit shares?

A company can forfeit shares only when the Articles of Association of the company contain a provision for share forfeiture. A shareholder subscribing to the shares of a company owes the subscription price of the shares to the company. The company may call upon the shareholder to pay the price in instalments.

How forfeiture of shares is different from surrender of 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.

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When can a company forfeit shares of shareholders?

When a shareholder fails to pay the allotment money or any subsequent calls, then the company informs the shareholder by giving him/her a proper notice. If after the notification, the shareholder still fails to pay the due money, then the company is allowed to forfeit the shares of such shareholders.