When should the shares be forfeited?
If a member fails to pay any call
money for the shares on the day appointed for payment thereof, the shares shall
be forfeited by the company.
Prerequisites for forfeiture
·
Power in
Articles of Association (AOA)-
The authority to forfeit the shares, in case of member
failing to pay call money, should be expressly provided in the Articles of
Association of the company under the head ‘Forfeiture of Shares’. If there is
no such power mentioned in the Articles of Association, shares cannot be
forfeited.
·
Board
Resolution
·
Intimation
to the Stock Exchange about the Forfeiture of Shares
The Board shall pass the resolution, for forfeiture
and for the issue of notice to the defaulting member, without which forfeiture
will not come into effect.
·
Issue of Notice-
The defaulting members should be issued a notice
calling for money due, failing which their shares will be liable for
forfeiture.
Six copies of the notice shall be forwarded to the Stock
Exchange.
Course of Action
·
The list of defaulting members (who had not paid
the call money due) shall be prepared.
·
The Stock Exchange should be informed about the
Board Meeting regarding forfeiture of shares.
·
At the meeting of the Board, the Board may, upon
passing a resolution for forfeiture and for issue of notice, serve a notice on
the shareholder with acknowledgement due requiring him to pay such amount
remaining unpaid.
·
Six copies of the notice should be sent to the
Stock Exchange.
·
Notice
shall state the amount due (with interest at a specified rate and the
dividend- if the AOA provides) and a
date at which the payment shall be made by the shareholder which shall not
be earlier than 14 days from the date of issue of notice.
·
The Notice shall also state that in the event of
non-payment of the money due on or before the date specified, the respective
shares shall be liable to forfeiture.
·
If money is not paid at that date, the company
may forfeiture the shares at anytime by passing a Board Resolution.
·
The person whose shares have been forfeited
shall cease to be a member but shall be held liable to pay to the company all
monies which are payable by him before forfeiture. However, liability shall
cease if and when the company receives all the monies that were due.
·
The entry of forfeiture should be made in the
Register of Members and the name of the concerned shareholder will be removed
from the Register and the information regarding the forfeiture should be
intimated to Stock Exchange.
·
The company may publish the notice of forfeiture
in the newspaper.
·
The concerned shareholder should be informed
about the forfeiture of his shares through registered post with acknowledgement
due or by any means provided in the AOA.
·
Duly verified declaration in writing signed by
the director or manager or company secretary of the company should be obtained,
stating the shares forfeited and the date, which shall act as the conclusive
evidence.
·
Subsequently, with the power mentioned in AOA, the
forfeited shares may be sold or disposed off in such manner as the Board may
think fit.
