Surrender of share
This query is : Resolved
01 January 2017
why surrender of share is done and what its impact on the company
04 January 2017
please reply
26 July 2025
Sure! Here’s a clear explanation about **surrender of shares** and its impact on the company:
---
### What is Surrender of Shares?
**Surrender of shares** means a shareholder voluntarily gives up their shares back to the company. This is different from selling shares to another investor. The company then cancels these shares, reducing the total number of shares outstanding.
---
### Why is Surrender of Shares Done?
1. **To reduce the company's capital:**
If the company wants to reduce its paid-up capital, shareholders can surrender shares instead of the company buying them back.
2. **To write off unpaid calls:**
Sometimes shareholders fail to pay calls on partly paid shares. The company may ask them to surrender those shares as penalty.
3. **To comply with company’s Articles or agreement:**
Certain agreements or Articles of Association may require shareholders to surrender shares in specific cases.
4. **For restructuring:**
When companies restructure shareholding or capital, surrender of shares may be part of the process.
5. **To facilitate buy-back or capital reduction without going to the market.**
---
### Impact of Surrender of Shares on the Company
1. **Reduction in Share Capital:**
Once shares are surrendered and accepted by the company, they are canceled, reducing the company's authorized and paid-up capital.
2. **Improved Financial Ratios:**
Reduction in capital can improve return on equity (ROE) and earnings per share (EPS), as equity base reduces.
3. **Possible Requirement of Approval:**
Share surrender may require approval of the board and sometimes shareholders depending on company law and Articles of Association.
4. **Accounting Impact:**
The company will debit share capital account and credit calls-in-arrears or reserves as per the reason for surrender.
5. **Legal Compliance:**
The company must comply with applicable laws (Companies Act) for reduction of capital or surrender of shares, including filing with Registrar of Companies (ROC).
---
### In brief:
* **Surrendering shares** is a way for shareholders to give up their shares to the company, often to reduce capital or due to non-payment of calls.
* It reduces the total shares and capital of the company and may have financial and legal consequences.
---
---
### What is Surrender of Shares?
**Surrender of shares** means a shareholder voluntarily gives up their shares back to the company. This is different from selling shares to another investor. The company then cancels these shares, reducing the total number of shares outstanding.
---
### Why is Surrender of Shares Done?
1. **To reduce the company's capital:**
If the company wants to reduce its paid-up capital, shareholders can surrender shares instead of the company buying them back.
2. **To write off unpaid calls:**
Sometimes shareholders fail to pay calls on partly paid shares. The company may ask them to surrender those shares as penalty.
3. **To comply with company’s Articles or agreement:**
Certain agreements or Articles of Association may require shareholders to surrender shares in specific cases.
4. **For restructuring:**
When companies restructure shareholding or capital, surrender of shares may be part of the process.
5. **To facilitate buy-back or capital reduction without going to the market.**
---
### Impact of Surrender of Shares on the Company
1. **Reduction in Share Capital:**
Once shares are surrendered and accepted by the company, they are canceled, reducing the company's authorized and paid-up capital.
2. **Improved Financial Ratios:**
Reduction in capital can improve return on equity (ROE) and earnings per share (EPS), as equity base reduces.
3. **Possible Requirement of Approval:**
Share surrender may require approval of the board and sometimes shareholders depending on company law and Articles of Association.
4. **Accounting Impact:**
The company will debit share capital account and credit calls-in-arrears or reserves as per the reason for surrender.
5. **Legal Compliance:**
The company must comply with applicable laws (Companies Act) for reduction of capital or surrender of shares, including filing with Registrar of Companies (ROC).
---
### In brief:
* **Surrendering shares** is a way for shareholders to give up their shares to the company, often to reduce capital or due to non-payment of calls.
* It reduces the total shares and capital of the company and may have financial and legal consequences.
---
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