What is the meaning of Forfeited Shares?
A forfeited share is a share in a company that the owner loses (forfeits) by failing to meet the purchase requirements. Requirements may include paying an allotment or call money owed, or avoiding selling or transferring shares during a restricted period
Need for forfeiture and Re-issue of shares:
If a member having been called upon to pay any call on his shares fails to pay the calls, the directors may either by adoption of Table A or by an express provision on the articles proceed to forfeit the shares held by such a defaulting member. Before the shares can be forfeited the company may serve a notice on the defaulting member requiring payment of the call. The notice must give not less than fourteen days’ time from the date of service of notice for the payment of the amount due. The notice must also state that in the event the non-payment of the amount due within the period mentioned in the notice the shares in respect of which call was made will be liable to forfeiture. A company can reissue forfeited shares in accordance with the provisions contained in the articles.
Steps Involved for forfeiture and Re-issue of shares:
Step-1: Convene the Meeting of Board of Directors of the Company for issue demand notice:
To check provision and procedure laid down in Article regarding forfeiture of shares. Preparation of Board Meeting notice, agenda and convene the board meeting for issue demand notice to the shareholders who had failed to pay any call on his shares. The notice must give not less than fourteen days’ time from the date of service of notice for the payment of the amount due.
Step-2: Convene the Meeting of Board of Directors of the Company for Forfeiture of shares:
If the shareholder fails to comply with the notice by the date requested, the board of directors can pass a board resolution for forfeiture of shares.
Step-3: Re-issue of Forfeited shares:
After passing the board resolution for forfeiture of shares. The next step is board can pass a board resolution for re-issue of forfeited shares.
Step-4: Issue of share certificates:
Issue the share certificates to the members whom the forfeited shares are re-issued
Documents Required for Forfeiture and re-issue of Shares:
- List of directors of the Company.
- Number of shares which are required to be forfeited.
- Name of Members whose shares are required to be forfeited.
- Existing MOA and AOA of the Company.