forfeiture of shares

Forfeiture of Shares:

• Meaning: It is compulsory termination of membership, due to non payment of call money on due date.
  
   
• Nature of Action: It is a compulsory action by the company.
  
   
• Reason: Forfeiture takes place because of non-payment of call money on the due date.
  
   
• Initiative: Company is taking the initiative.
  
   
• Time Required: Forfeiture requires longer time.
  
   
• Effect: Forfeiture affects the reputation of a share holder, as it is a penal action by the company.
   

Forfeiture of shares means cancellation of membership of a shareholder due to non payment of calls made by the company. Forfeiture of shares amount to :

– Cancellation of the membership of the defaulting shareholder and

– Reduction of share capital of the company.

• Power to forfeit shares is given in the Articles of Association of the company. The Board of Directors have to give a fourteen days notice to the defaulting Shareholder
• There are three situations when shares can be forfeited:

(i) Shares issued at par

(ii) Shares issued at premium

(a) Premium received in full

(b) Premium due but not yet received

(iii) Shares issued at discount

·        In all cases share capital is debited by the called up amount on forfeited shares

·        Shares forfeited A/c is credited by the amount received (excluding the amount of premium) on forfeited shares.

·         Securities premium A/c will not get affected if premium on forfeited shares has been received but it will be debited if it is due but not received

·         Shares issued at a discount when forfeited discount on issue of shares will always be credited by the amount of discount allowed on forfeited shares:

Guys nitin is asking the nature of  "share forfeiture account"............plz i also need its answer plz rply....

Originally posted by : Nitin Grover
	Dear Nitin Yes it can be used for issuing of Bonus Share. further it can be used as paying premium on redemption, debenture, etc Regards

plz quote relevant section and cases if possible.