procedure for forfeiture of shares

Issued at Par: When shares issued at par are forfeited, the following actions are taken by the company. Typically, companies issue forfeited shares at premium or par, both being discussed below in detail. The procedure for the forfeiture of shares is likely to be different depending on the reason for forfeiture arising and what the articles state. Before such forfeiture is done a notice must be given to the shareholder. If any shareholder is not able to pay the amount of call, the company may exercise the power to forfeit his shares on which he is unable to pay the amount of call. The notice must provide the shareholder with a minimum of 14 days to make the payment due, or his shares will be forfeited. PROCEDURE FOR FORFEITURE OF SHARES. Forfeiture on any ground would be an illegal reduction of share capital. 1. However, a company can issue shares While understanding the procedure of forfeiture of shares, it is essential to understand related accounting entries. But, the company can forfeit shares only if the Article of Association of the company allow forfeiture. The technicalities must be strictly complied with as even a little inaccuracy may be as fatal as the greatest one. Forfeiture of Shares issued at Premium- This situation has two possibilities, 1. In order that the forfeiture of shares is valid, the procedure expressly prescribed by the articles must be strictly adhered to. The power to forfeit shares must be expressly given in the company’s articles. (shares forfeited for non–payment of allotment money and calls made). The fixed value of a share, printed on the share certificate, is called nominal/ par / face value of a share. A forfeited share is a share in a publicly-traded company that the owner loses (or forfeits) by neglecting to live up to any number of purchase requirements. PROCEDURE FOR VALID FORFEITURE 1. It cannot be implied. Securities Premium amount has been received- Here, the share capital amount is debited with the called-up amount and then it will be credited to Shares Allotment (amount not received on allotment), Forfeited Shares ( … Reissue Of Shares 4 SHARE CAPITAL Total capital of the company is divided into a number of small indivisible units of a fixed amount and each such unit is called a share. Procedure for Forfeiture of shares: A company must follow the following procedure for forfeiture of shares: A) Issue of notice: A notice must be served on the defaulting shareholders asking them to pay the outstanding call money together with interest on the outstanding calls if any. Regulations 29 to 35 of the Table A, however, provide the procedure. Forfeiture of share means the cancellation of the shares for non-payment of calls due. (f) To arrange a Board meeting to take a decision on forfeiture of shares, before t-he second reminder is sent. Accounting: Forfeiture of Shares: Procedure of Forfeiture of Shares and Accounting Treatment of Forfeited Shares Get unlimited access to the best preparation resource for UGC Public-Administration: fully solved questions with step-by-step explanation - practice your way to … Even after such notice if the shareholder does not pay, then the shares will be canceled. Forfeiture essentially means cancellation. In Accordance with the Articles: Share can be forfeited if articles confer such a power on the directors. A forfeiture of any share must be done on the authority of the Board of Directors, or of committee thereof, if authorised by articles of associations for the purpose, by its resolution. For example, a forfeiture … Unless articles don't provide forfeiture of any share, it should be altered accordingly. Forfeiture: It is to be noted that the Companies Act does not provide any Sections specifying forfeiture of shares. 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