Forfeiture of Shares: Guide to the Process and Implications

Affluence Advisory | Last updated: 22 August 2024

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Share forfeiture is the process where a company cancels shares allotted to an investor who has defaulted on payments, typically for non-payment of 'calls'. While not explicitly covered by the Companies Act, it must be provided for in the company's articles and exercised strictly according to regulations. A defaulting shareholder ceases to be a member and loses rights to the shares, though they may still be liable for outstanding amounts. The company can then reissue these shares, often at a discount.

MEANING Share forfeiture can be defined as the process of a cancelling the shares allotted to the defaulting investors by the company. The shares thus cancelled, which were earlier allotted, are termed as forfeited shares. This means the company cancels or takes away the shares that the person owns. The Companies Act doesn't explicitly cover forfeiture of shares, but it does allow companies to provide for it in their articles. A company may if authorised by its articles, forfeit shares for non

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Why Affluence Advisory for any Tax Compliance services? Affluence Advisory Pvt Ltdis a multi-disciplinary consulting and compliance firm that is managed by a specialized team of Chartered Accountants, Company Secretaries, Corporate Lawyers, and Other Professionals who are committed to providing a quality experience ... Read more

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