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MEANING

If a shareholder fails to pay the due amount of allotment or any call on shares
issued by the company, the Board of directors may decide to cancel
his/her membership of the company. With the cancellation, the defaulting
shareholder also loses the amount paid by him/her on such shares.
Thus when a shareholder is deprived of his/her membership due to non payment
of calls, it is known as forfeiture of shares.

The result of forfeiture of shares is :Cancellation of membership of the shareholder.


Reduction of issued share Capital of the company

when on non payment of money called on shares, the shares of a holder are forfeited , it
is called forfeiture... it is a penalising action... law provides the guidelines for carrying
out this procedure........ whereas surrender is an intentional act of the holder wen he
accepts that he cant pay the called money n hence wants to give up his holding..
law doesnt provide any guidelines for this...

Forfeiture of shares refers to cancellation of shares by the company issued to the


shareholders for non-payment of money called upon shares

if any shareholder fails to pay the amount due on allotment or on any call withinthe
specificed period, the derictors may cancel his share. this is called foreiture of shares .

EFFECT OF FORFEITURE

5.1 A person whose shares have been forfeited would cease to be a member of the
company, in respect of those shares.

5.2 A person whose shares have been forfeited would notwithstanding the forfeiture,
remain liable to pay to the company all moneys, which at the date of forfeiture
were payable by him to the company in respect of the shares.

The liability of the defaulting member shall not cease till the company receives
the full payment which is due in respect of shares. The name of the defaulting
member will be placed as a past member on the list of contributories if a winding
up of the company commences within one year of the date of forfeiture.

Procedure of forfeiture of shares

The authority to forfeit shares is given to the Board of Directors in Articles of


Association of the company. The Board of Directors has to give at least fourteen days
notice to the defaulting members calling upon them to pay outstanding amount with or
without interest as the case may be before the specified date. The notice must also state
that if the shareholders fail to remit
the amount mentioned therein within the stipulated period, their shares will be forfeited.
If they still fail to pay the amount within the specified period of time, the Board of
Directors of the company may decide to forfeit such shares by passing a resolution. The
decision regarding the forfeiture of shares should be communicated to the concerned
allottees and should be asked to return the allotment letters and share certificates of the
forfeited shares to the company.