Meaning of forfeiture of shares (Meaning of Forfeiture of Shares)
If the amount of the shares issued by the company is received in installments, then some of the shareholders are unable to pay the amount of the calls on their shares, then in such a situation, the defaulter can be presented against the shareholder or his shares can be redeemed in accordance with the provisions of the Articles of Association. may be forfeited. Often the company’s shares are forfeited. Forfeiture of shares means to forfeit the allotment of shares by the defaulting shareholder and forfeiture of the amount so far received.
Procedure for forfeiture of shares (Procedure of Forfeiture of Shares)
If the allotment amount is not paid within the stipulated time, the secretary of the company prepares a list of all such shareholders and this list is presented to the director. After this, a notice is sent to the defaulting shareholders that the unpaid calls and the interest due on them should be paid within the stipulated time, otherwise their shares will be forfeited. If the defaulting shareholder does not pay even on this notice, a similar notice is sent to him. If the payment is not received even on this notice, the Board of Directors passes a resolution for forfeiture of the shares. When this motion is passed, a notice is given to the shareholder that his shares have been forfeited and that he should return the share certificate and his name is removed from the register of members. The amount received on those shares is transferred to the share forfeiture account. After this a written declaration is published in which the shares forfeited are mentioned.
Rules relating to forfeiture of shares (Rules Regarding the Forfeiture of Shares)
(1) Forfeiture of shares is made only when the Articles of Forfeiture to the directors of the company
(2) Forfeiture can be done only on the ground of non-payment of demands, on any other ground get the right
(3) The right of withdrawal is received by the directors in the form of a trust, so it should be used for the benefit of the company.
(4) No forfeiture can be considered valid unless the conditions necessary for the forfeiture are fulfilled.
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Entries on Forfeiture of Shares (Entries on Forfeiture of Shares)
The entries for forfeiture of shares can be explained as follows:
(1) Forfeiture of shares issued at par
Share Capital ale (from the amount called for on shares)
To Share Forfeiture a/c (from the amount received on forfeiture shares)
To Share Allotment a/c (from the amount not received on allotment)
To Share First Call a/c (from the amount not received on the first call)
To Share Second Call a/c (Being share forfeited)
Re-issue of forfeited shares (Reissue of Forfeited Shares)
The forfeited shares are the origin of the company. The company may re-issue them or terminate them. The re-issue can be at par or at a discount or at a premium. The forfeited shares cannot be reissued for less than the amount that was due on them, that is, the company can issue those shares at a discount, but the maximum amount of the discount cannot exceed the amount in the share abduction account. Could be The entries on re-issue of shares are as follows: