Forfeiture of shares
This query is : Resolved
16 July 2013
in a private limited company:
if there is no clause mentioning forfeiture of shares then can a company forfeit shares according to table A??
or is it necessary to first amend the clause in article and then follow the procedure given in table A??
if there is no clause mentioning forfeiture of shares then can a company forfeit shares according to table A??
or is it necessary to first amend the clause in article and then follow the procedure given in table A??
16 July 2013
Hi
The Companies Act, 1956 does not contain any provision in respect f forfeiture of shares in the company. However, articles of associations of almost all the company contain detailed provisions regulating forfeiture of shares. These provisions are based on the regulation 29 to 35 in Table A of Schedule I to the Companies Act, 1956 or recast based on the regulations.
So, it is necessary to amend article to insert forfeiture clause.
The Companies Act, 1956 does not contain any provision in respect f forfeiture of shares in the company. However, articles of associations of almost all the company contain detailed provisions regulating forfeiture of shares. These provisions are based on the regulation 29 to 35 in Table A of Schedule I to the Companies Act, 1956 or recast based on the regulations.
So, it is necessary to amend article to insert forfeiture clause.
16 July 2013
Circumstances in which Forfeiture of shares cannot be made :
The shares can be forfeited only of non-payment of calls and not for any other debt due from a member. Non-payment of calls is not the only reason for which shares can be forfeited; a company by its articles may provide for other grounds also. [Naresh Chandra Sanyal v Calcutta Stock Exchange Association Ltd. (1971) 41 Comp Cas 51 (SC)].
Shares of the shareholders who were running business of the company, cannot be forfeited for losses suffered by company. [Dilbhajan Singh v New Samundri Transport Co. (P) Ltd. (1985) 58 Comp Cas 247 (P&H)].
CLB (now Tribunal) cannot direct forfeiture of shares acquired in violation of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations. [Aska Investments (P) Ltd. v Grob Tea Co. Ltd. (2005) 61 SCL 134 (Cal)].
Circumstances in which Forfeiture of shares cannot be made :
The shares can be forfeited only of non-payment of calls and not for any other debt due from a member. Non-payment of calls is not the only reason for which shares can be forfeited; a company by its articles may provide for other grounds also. [Naresh Chandra Sanyal v Calcutta Stock Exchange Association Ltd. (1971) 41 Comp Cas 51 (SC)].
Shares of the shareholders who were running business of the company, cannot be forfeited for losses suffered by company. [Dilbhajan Singh v New Samundri Transport Co. (P) Ltd. (1985) 58 Comp Cas 247 (P&H)].
CLB (now Tribunal) cannot direct forfeiture of shares acquired in violation of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations. [Aska Investments (P) Ltd. v Grob Tea Co. Ltd. (2005) 61 SCL 134 (Cal)].
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