Minimum Price for Reissuing Forfeited Shares

When a company issues shares at par value, it means that the shares are being issued at their face value. If those shares are later forfeited, the company may choose to reissue them at a price that is different from the original par value. However, there are legal restrictions that must be followed when reissuing forfeited shares.

Legal Restrictions on Reissuing Forfeited Shares

When a shareholder fails to pay for their shares, the company has the right to forfeit those shares. This means that the shares become the property of the company and can be reissued to a new shareholder. However, there are legal restrictions on how those shares can be reissued.

According to the Companies Act of 2013, a company can only reissue forfeited shares at a price that is equal to or higher than the original issue price. This means that if the shares were issued at par value, the company cannot reissue them at a price that is lower than that amount.

Calculation of Minimum Price

The minimum price at which a company can reissue its forfeited shares is determined by the original issue price of the shares. The calculation is as follows:

Minimum Price = Par Value + Premium (if any)

For example, if a company issued shares at a par value of Rs. 10 and a premium of Rs. 5, the minimum price at which those shares can be reissued is Rs. 15.

Conclusion

Reissuing forfeited shares can be a way for a company to raise additional capital. However, it is important to follow the legal restrictions on the minimum price at which those shares can be reissued. By understanding the calculation for determining the minimum price, companies can ensure that they are in compliance with the law when reissuing forfeited shares.