Best answer: When and how the shares of a company are forfeited?

A forfeited share is an equity share investment which is cancelled by the issuing company. A share is forfeited when the shareholder fails to pay the subscription money called upon by the issuing company.

What is the procedure of forfeiture of shares?

Procedure of forfeiture of shares

The Board of Directors has to give at least fourteen days notice to the defaulting members calling upon them to pay outstanding amount with or without interest as the case may be before the specified date.

What is forfeiture of shares when and how the shares of a company can be forfeited?

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.

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What are the reasons for forfeiture of shares?

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.

When can a company forfeit shares in one sentence?

When the shareholder fails to pay the full amount of share which he agreed to pay in installments, the company can forfeit his shares.

When can a share be forfeited?

A forfeited share is an equity share investment which is cancelled by the issuing company. A share is forfeited when the shareholder fails to pay the subscription money called upon by the issuing company.

How are shares transferred?

Step 1: Obtain share transfer deed in the prescribed format. Step 2: Execute the share transfer deed duly signed by the Transferor and Transferee. Step 3: Stamp the share transfer deed as per the Indian Stamp Act and Stamp Duty Notification in force in the State.

How and when the shares issued to the public can be forfeited explain with examples?

The main time when shares are forfeited is where a call payment has been requested by the company on nil or partly paid shares and the shareholder has failed to pay the amount called by the required date. … Fully paid shares issued subject to a restriction on sale or transfer for a set period of time.

When shares are forfeited share capital account is?

When shares are forfeited, share capital account is debited. Explanation: Share Capital Account represents the liability of the company as it is the amount that is borrowed from the public. Therefore, at the time of forfeiture of shares, it is debited with a called-up amount.

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Can fully paid-up shares be forfeited by a company?

Fully paid-up shares are those shares on which the shareholders’ have paid the entire amount due from such shares. Forfeiture of shares is done when a shareholder fails to pay the amount when called by the company. ​Therefore, what we can say is that fully paid-up shares cannot be forfeited.

What do you mean by reissue of shares?

If shares are forfeited the membership of the shareholder stands cancelled and the shares become the property of the company. Thereafter, the company has an option of selling such forfeited shares. The sale of forfeited shares is called ‘reissue of shares’.

Can partly paid shares be forfeited?

The standard procedure to be followed in case of forfeiture of partly paid-up shares is as follows: … If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may be forfeited by a resolution of the Board of Directors of the company.

On what conditions can forfeited shares be reissued?

There are four situations in which re-issue of shares take place.

  • Forfeited shares reissued at discount when originally issued at par.
  • Shares reissued at par or at premium, when originally issued at par.
  • Forfeited shares reissued at par, at discount and at premium when originally issued at premium.

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.

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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.