Forfeiture of share of minority shareholders

Kanchi Agarwal (Technical Support & Student) (479 Points)

10 June 2013

Sir,

Please solve my query below.

Can fully paid up shares of minority shareholders in the company be forfeited by majority shareholders in any kind of circumstances?

If minority shareholders are involve in wrong doing against the company or creating problems in the operations of the company by creating dead lock in the general meeting etc, then is it possible that majority shareholders forfeit shares of such minority shareholders. If it is possible please tell me the procedure for doing so.

I think it is not covered by any section of law. Please share any case law in this regard.

Thank you

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3 Replies

Sarvesh (Company Secretary) (179 Points)
Replied 10 June 2013

Please refer your AOA in this regard, first. Forfeiture can be done in compliance of the provisions of AOA of the Company.

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P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8219 Points)
Replied 10 June 2013

Subject to the provisions of your Articles, you cannot forfeit shares of minority shareholders as such. You may have to file petition u/s 397/398 for oppression or mismanagement.

Kanchi Agarwal (Technical Support & Student) (479 Points)
Replied 10 June 2013

Sir, our AOA are containing routine provisions for forfeiture like for nonpayment of calls company can forfeit shares.

Is there any case law which allows forfeiture of minority shareholding by majority. Further where we should seek remedy in company law or civil law, in case shareholder is creating problem in the working of company.

Further petition u/s 397 and 398 is for minority shareholders. Is there any specific provision/case law which helps majority shareholders?