Unless articles don't provide forfeiture of any share, it should be altered accordingly. The fixed value of a share, printed on the share certificate, is called nominal/ par / face value of a share. Typically, companies issue forfeited shares at premium or par, both being discussed below in detail. 1. 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 … Introduction: What is Share Forfeiture ? 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. Issued at Par: When shares issued at par are forfeited, the following actions are taken by the company. You should submit to TRA the financial statements of the last three years of the company whose shares you wish to transfer for estimation of the market value of shares. In Accordance with the Articles: Share can be forfeited if articles confer such a power on the directors. However, a company can issue shares (ii) Liability: If the articles of the company permit, the company […] In order that the forfeiture of shares is valid, the procedure expressly prescribed by the articles must be strictly adhered to. Forfeiture of shares refers to the cancelation of shares. Forfeiture of shares issued at Par When shares issued at par are forfeited the accounting treatment will be as follows: (i) Debit Share Capital Account with amount called up (whether received or not) per share up to the time of forfeiture. The power to forfeit shares must be expressly given in the company’s articles. While understanding the procedure of forfeiture of shares, it is essential to understand related accounting entries. PROCEDURE FOR VALID FORFEITURE 1. We describe the transfer process below. Forfeiture on any ground would be an illegal reduction of share capital. Share forfeiture is the process by which the directors of a company cancel the power of a shareholder if he does not pay his call money when the company demands for it.. (f) To arrange a Board meeting to take a decision on forfeiture of shares, before t-he second reminder is sent. with the amount received up to the time of forfeiture. It cannot be implied. 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. Regulations 29 to 35 of the Table A, however, provide the procedure. (shares forfeited for non–payment of allotment money and calls made). 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 ( … On forfeiture, the company extinguishes the title of such shareholder. Forfeiture: It is to be noted that the Companies Act does not provide any Sections specifying forfeiture of shares. The company will give 14 days' notice; after 14 days if the shareholder does not pay the company will forfeit his shares and strike his name from the register of shareholders. Forfeiture of Shares issued at Premium- This situation has two possibilities, 1. Hence by merely signing an agreement and surrendering the share certificates does not mean anything. The technicalities must be strictly complied with as even a little inaccuracy may be as fatal as the greatest one. The Effects of Forfeiture of Shares in a Company are as follows: (i) Termination of Membership: The shareholder, whose shares have been forfeited, shall cease to be a member of the company and his name shall be struck out from the Register of Members. (ii) Credit Share Forfeited A/c. In this case, the company may forfeit such shares. Sometimes, shareholders may be unable to pay the money due on allotment or calls on the due date.
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