When and how the shares of a company can be forfeited?

How the shares of a company can 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.

When can a company forfeit its shares?

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.

When can a company forfeit shares answer in one sentence?

Ans: When the shareholder fails to pay the full amount of share which he agreed to pay in installments, the company can forfeit his shares. 6.

Why do companies forfeit their 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. … Fully paid shares that are subject to a restriction on the sale or transfer for a set amount of time.

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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 forfeited shares be reissued?

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.

Under what grounds forfeiture of shares takes place?

Forfeiture can happen due to numerous reasons like non-payment of dues, delay in instalments, etc. Incidentally, a company is legally allowed to forfeit a share only if they allow such action under their Article of Association.

Are forfeited shares Cancelled?

Many companies may face the challenge of removing shareholders from a company. … However, forfeited shares can be cancelled under section 258D which states that ‘a company may, by resolution passed at a general meeting, cancel shares that have been forfeited under the terms on which the shares are on issue.

What is forfeiture of shares answer in one sentence?

Forfeiture of shares is a process where the company forfeits the shares of a member or shareholder who fails to pay the call on shares or instalments of the issue price of his shares within a certain period of time after they fall due.

What is working capital answer in one word?

Answer: Working capital is the amount that the company uses in its day to day trading operations. It is a measure of company’s efficiency and short term financial health or liquidity. Working capital = current assets – current liabilities.

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When shares are forfeited capital account is debited by?

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.

What happens when shares are forfeited?

What Is a Forfeited Share? … When a share is forfeited, the shareholder no longer owes any remaining balance and surrenders any potential capital gain on the shares, which automatically revert back to the ownership of the issuing company.

Can unpaid shares be transferred?

Yes, both unpaid shares and partly paid shares can usually be transferred to a new shareholder (subject to the company’s Articles of Association).