Re-issue of forfeited shares by a private company
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
29 June 2013
In case of re-issue of forfeited shares by a private limited company, it is true that a board resolution will suffice.
But my further question is what is the further procedure i.e. are we also required to comply with the provisons relating to transfer of shares.
But my further question is what is the further procedure i.e. are we also required to comply with the provisons relating to transfer of shares.
30 June 2013
Hi
PROCEDURE FOR FORFEITURE OF SHARES
1. A forfeiture of any share must be done on the authority of the Board of Directors, or of committee thereof, if authorised by articles of associations for the purpose, by its resolution. The resolution should provide for a notice to be given to the shareholder concerned before the forfeiture is actually effected in pursuance of the resolution, requiring payment of so much of the calls as is unpaid, together with any interest which may have accrued.
2. The notice threatening forfeiture in pursuance of the Board Resolution must be given in accordance with the provisions of the articles. The notice aforesaid shall:
- name a further day (not being earlier than the expiry of 14 days from the date of service of notice) on or before which the payment required by the notice is to be made; and
- state that, in the event of non-payment on or before the day so named, the shares in respect of which the call was made will be liable to be forfeited.
3. The notice must;
- specify clearly the amount payable on account of unpaid call money as well as interest accrued , if any, and other expenses.
- mentioned the day on or before which the amount specified ought to be paid, not being earlier than 14 days from the date of service of notice
- contain an unambiguous statement to the effect that in the effect of failure to pay the specified amount latest on the appointed day, the shares in respect of which the amount remain un paid would be liable to be forfeited.
4. The notice threatening forfeiture as contemplated in Regulation 29 of Table A must be served in accordance with the provisions of section 53 of the Companies Act, 1956.
5. If the call money is not paid in response to such notice threatening forfeiture, the company may, at any time thereafter, before the payment required by the notice has been made, forfeit the shares by a resolution of the Board to the effect.
6. It is common practice to publish a notice of forfeiture in newspapers so that the members of the public are made aware of the forfeiture and cautioned not to deal in the forfeited shares.
7. A further notice after the shares are forfeited is not necessary. However, it is advisable and a common practice to give a notice of the shares having been forfeited to the concerned shareholders by registered post.
8. Regulation 34 of Table A provides for a verified declaration in writing to be issued under the signature of director, manager or secretary of the company that a share in the company has been duly forfeited on a date stated in declaration. The declaration so made shall be conclusive evidence of the facts stated therein as against all persons claiming to be entitled to the shares forfeited. The accidental not receipt of notice of forfeiture by the defaulter is not a ground for relief against forfeiture regularly effected.
9. The fact of the forfeiture will be entered in the Register of Members and the name of the concerned shareholder as a member of the company will be deleted from the register.
10. Notify the Stock Exchange at which the securities of the Company are listed about such forfeiture of shares.
PROCEDURE FOR FORFEITURE OF SHARES
1. A forfeiture of any share must be done on the authority of the Board of Directors, or of committee thereof, if authorised by articles of associations for the purpose, by its resolution. The resolution should provide for a notice to be given to the shareholder concerned before the forfeiture is actually effected in pursuance of the resolution, requiring payment of so much of the calls as is unpaid, together with any interest which may have accrued.
2. The notice threatening forfeiture in pursuance of the Board Resolution must be given in accordance with the provisions of the articles. The notice aforesaid shall:
- name a further day (not being earlier than the expiry of 14 days from the date of service of notice) on or before which the payment required by the notice is to be made; and
- state that, in the event of non-payment on or before the day so named, the shares in respect of which the call was made will be liable to be forfeited.
3. The notice must;
- specify clearly the amount payable on account of unpaid call money as well as interest accrued , if any, and other expenses.
- mentioned the day on or before which the amount specified ought to be paid, not being earlier than 14 days from the date of service of notice
- contain an unambiguous statement to the effect that in the effect of failure to pay the specified amount latest on the appointed day, the shares in respect of which the amount remain un paid would be liable to be forfeited.
4. The notice threatening forfeiture as contemplated in Regulation 29 of Table A must be served in accordance with the provisions of section 53 of the Companies Act, 1956.
5. If the call money is not paid in response to such notice threatening forfeiture, the company may, at any time thereafter, before the payment required by the notice has been made, forfeit the shares by a resolution of the Board to the effect.
6. It is common practice to publish a notice of forfeiture in newspapers so that the members of the public are made aware of the forfeiture and cautioned not to deal in the forfeited shares.
7. A further notice after the shares are forfeited is not necessary. However, it is advisable and a common practice to give a notice of the shares having been forfeited to the concerned shareholders by registered post.
8. Regulation 34 of Table A provides for a verified declaration in writing to be issued under the signature of director, manager or secretary of the company that a share in the company has been duly forfeited on a date stated in declaration. The declaration so made shall be conclusive evidence of the facts stated therein as against all persons claiming to be entitled to the shares forfeited. The accidental not receipt of notice of forfeiture by the defaulter is not a ground for relief against forfeiture regularly effected.
9. The fact of the forfeiture will be entered in the Register of Members and the name of the concerned shareholder as a member of the company will be deleted from the register.
10. Notify the Stock Exchange at which the securities of the Company are listed about such forfeiture of shares.
30 June 2013
Forfeiture can be effected by a Board resolution :
Forfeiture will be effected by means of a Board resolution. (Specimen of the Board resolution has been given in Appendix 4) Notice precedent to forfeiture must be given to the defaulting shareholder. In the matter of forfeiture of shares, technicalities must be strictly observed. "The defect in the notice, though slight, invalidates it and is fatal to the forfeiture", as held by the Supreme Court in Public Passengers Service Ltd. v Khadar AIR 1966 SC 439.
In Sulochana Nathany v Hindustan Malleables & Forgings Ltd. (2001) CLC 448 (CLB), it was held that to constitute a valid forfeiture articles should give such powers to the directors. There should be notice of forfeiture and power should be exercised following the procedure prescribed in the articles.
Forfeiture will be effected by means of a Board resolution. (Specimen of the Board resolution has been given in Appendix 4) Notice precedent to forfeiture must be given to the defaulting shareholder. In the matter of forfeiture of shares, technicalities must be strictly observed. "The defect in the notice, though slight, invalidates it and is fatal to the forfeiture", as held by the Supreme Court in Public Passengers Service Ltd. v Khadar AIR 1966 SC 439.
In Sulochana Nathany v Hindustan Malleables & Forgings Ltd. (2001) CLC 448 (CLB), it was held that to constitute a valid forfeiture articles should give such powers to the directors. There should be notice of forfeiture and power should be exercised following the procedure prescribed in the articles.
30 June 2013
Intimation for forfeiture of shares
Further, articles generally provide that after the shares have been forfeited, an intimation is sent to the shareholder concerned and for sufficient reasons, the forfeiture may be annulled at the discretion of the Board of directors.
Board may cancel the forfeiture of shares:
In case defaulting shareholder approaches after forfeiture to cancel the forfeiture, the Board has been empowered to cancel such a forfeiture and claim due amount with interest.
A forfeiture solemnly resolved upon and enforced for a long time, should not be set aside, nor can ex-member be reinstated without his consent. [Dhunraj Keshrimal v N.H. Wadia (1933) 57 ILR Bom 413].
Once forfeiture has been enforced, the contract between the company and the member comes to an end; there can be no subsequent recession of forfeiture without the shareholder's consent. [Exchange Trust Ltd., In re (1903) 1 Ch. 711].
If shares were forfeited for non-payment of a call which was invalid, the company could withdraw forfeiture and issue a fresh call. [Bhagirath Spg. & Wvg. Co. Ltd. v Balaji Bhavani Power AIR 1930 Bom. 267].
Mere waiver, acquiescence or laches does not disentitle a shareholder from challenging forfeiture. [Sha Mulchand & Co. v Jawahar Mills Ltd. (1953) 23 Comp Cas 1 (SC)].
Intimation for forfeiture of shares
Further, articles generally provide that after the shares have been forfeited, an intimation is sent to the shareholder concerned and for sufficient reasons, the forfeiture may be annulled at the discretion of the Board of directors.
Board may cancel the forfeiture of shares:
In case defaulting shareholder approaches after forfeiture to cancel the forfeiture, the Board has been empowered to cancel such a forfeiture and claim due amount with interest.
A forfeiture solemnly resolved upon and enforced for a long time, should not be set aside, nor can ex-member be reinstated without his consent. [Dhunraj Keshrimal v N.H. Wadia (1933) 57 ILR Bom 413].
Once forfeiture has been enforced, the contract between the company and the member comes to an end; there can be no subsequent recession of forfeiture without the shareholder's consent. [Exchange Trust Ltd., In re (1903) 1 Ch. 711].
If shares were forfeited for non-payment of a call which was invalid, the company could withdraw forfeiture and issue a fresh call. [Bhagirath Spg. & Wvg. Co. Ltd. v Balaji Bhavani Power AIR 1930 Bom. 267].
Mere waiver, acquiescence or laches does not disentitle a shareholder from challenging forfeiture. [Sha Mulchand & Co. v Jawahar Mills Ltd. (1953) 23 Comp Cas 1 (SC)].
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