What is mean by forfeiture of shares?

When a share is forfeited, the shareholder no longer owes any remaining balance and surrenders any potential capital gain on the shares, which automatically revert back to the ownership of the issuing company.

What do you mean by forfeiture of shares Class 12?

Forfeiture of Shares. Forfeiture of share means the cancellation of the shares for non-payment of calls due. … If any shareholder is not able to pay the amount of call, the company may exercise the power to forfeit his shares on which he is unable to pay the amount of call.

When can a company forfeit shares?

When a shareholder fails to pay the allotment money or any subsequent calls, then the company informs the shareholder by giving him/her a proper notice. If after the notification, the shareholder still fails to pay the due money, then the company is allowed to forfeit the shares of such shareholders.

What do you mean by forfeiture and reissue of shares?

If shares are forfeited the membership of the shareholder stands cancelled and the shares become the property of the company. Thereafter, the company has an option of selling such forfeited shares. The sale of forfeited shares is called ‘reissue of shares’.

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What is forfeiture of shares answer in one sentence?

When a shareholder fails to pay the call money or premium on the shares in spite of repeated reminders and warnings, the company forfeits the shares of such defaulters known as forfeiture of shares.

What is forfeiture of shares how does it differ from surrender of shares?

Forfeiture of shares refers to the situation where the allotment of shares is cancelled for the shareholders due to non-payment of any installments. In contrast to that, surrender of shares takes place when shareholders return the shares to the company for cancellation.

What is the effect of forfeiture?

– The liability of a person whose shares have been forfeited comes to an end when the company receives the payment in full of all such money in respect of shares forfeited. – A member is liable for unpaid calls even after the forfeiture of shares.

How do you treat forfeiture of shares?

Accounting Treatment for Forfeiture

  1. Share Capital – debited with total amounts called up.
  2. Unpaid Call A/c (Allotment, First Call etc) – credited with the portion of the amount called up but unpaid.
  3. Share Forfeiture A/c – credited with the amount already paid by the defaulter.

What is issue of forfeited shares?

A forfeited share is an equity share investment which is cancelled by the issuing company. A share is forfeited when the shareholder fails to pay the subscription money called upon by the issuing company.

What is forfeiture share Shaalaa?

(a) Forfeiture of shares is a process where the company forfeits the shares of a member or shareholder who fails to pay the call on shares or installment of the issue price of his shares within a certain period of time after they fall due.

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What is forfeiture in economics?

Forfeiture refers to a loss of any property, money, or assets without consideration or compensation in return. A forfeiture generally occurs due to default in complying with repayment obligations under a contract. It can also be used as a penalty for an illegal way of conducting business.

What is call in arrears?

Calls-in-Arrears. If some amount, called in respect of a share, is not paid before or on the specific date fixed for payment, such amount which is not paid, is called “Calls-in-arrears”. … In case, any default on account of not paying the call money is known as “ call in arrears ”.