— Kishore V, SME and ACW at Edumarz
- If a shareholder fails to pay the allotment money and/or any call money on his shares as required by the Articles of Association, his shares may be forfeited.
Forfeiture of shares is defined as the cancellation of shares and the forfeiture of the sum received in exchange for such shares.
The method for forfeiting shares is outlined in Table F of the Companies Act, 2013, as follows:
I) If a member fails to pay any call, or instalment of a call, on the due date, the company’s Board of Directors may serve a notice on him/her at any time thereafter, for as long as any part of the call or instalment remains unpaid, requiring payment of the amount due, plus any interest that may have accrued.
(ii) If a shareholder fails to pay the required amount, the corporation has the authority to have his or her share forfeited by a resolution.
(iii) The shareholder’s name is deleted from the list of members (i.e., shareholders).
Accounting Treatment of Share Forfeiture–
(ii) Shares issued at a premium are forfeited
(a) If a forfeited share was issued at a premium, the amount of the premium received is not reflected if the amount of the premium is received.
(b) In certain cases, forfeited shares were issued at a premium; in this situation, if the premium was not paid, the premium not received is given.