Surrender of shares

This query is : Resolved 

30 November 2009

The nominal value of a share in X Co Ltd is Rs.100 out of which Rs.40 is called and paid up. The company, as revealed by its last balance sheet, was losing heavily. A shareholder surrenders his 20 shares to the company and the directors of X Co. Ltd. accepted the surrender. Is such surrender legally maintainable?

CS Mitesh Mehta (Expert)
30 November 2009


Surrender of Shares

The Companies Act, 1956 makes no provisions for surrender of shares. A company cannot accept surrender od shares and a shareholders who surrenders shares continues to be a member and a contributory.

It was held in Naraindas Lahoredas, In re (1934) that there can be no valid surrender of shares that are not fully paid.

Mere handing over of share certificates cannot constitute surrender of shares and a surrender of shares can be made if the articles give the directors power to accept a surrender of shares.

^^^ AJIT ^^^ (Querist)
30 November 2009

I thank you Expert for your detailed reply. Regards.

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