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.
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.
Forfeiture of shares means cancellation of shares and seizure of the amount received from the defaulting shareholders, whose shares have been forfeited. Upon forfeiture, the name of original shareholder must be removed from the register of members.
Forfeiture of shares is referred to as the situation when the allotted shares are cancelled by the issuing company due to non-payment of the subscription amount as requested by the issuing company from the shareholder.
What do you mean by forfeiture?
Definition of forfeiture
1 : the act of forfeiting : the loss of property or money because of a breach of a legal obligation assets subject to forfeiture. 2 : something (such as money or property) that is forfeited : penalty. Synonyms More Example Sentences Learn More About forfeiture.
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’.
When Forfeiture of shares Issued at Par
The company debits the Share Capital Account with the amount called-up up to the date of forfeiture on shares. It credits the Shares Allotment Amount or Shares Call Account with amount called-up on forfeited shares but due from the shareholders.
What is fixed capital answer in one sentence?
Solution. Fixed capital is that portion of capital which is invested in fixed assets such as land, building, furniture, etc.
Shares are units of equity ownership in a corporation. For some companies, shares exist as a financial asset providing for an equal distribution of any residual profits, if any are declared, in the form of dividends.
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.