CA Foundation Exam > CA Foundation Notes > Principles and Practice of Accounting > PPT - Forfeiture and Reissue of Shares - 2
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Page 2
Transfer to
Capital
Reserve
Reissue
Forfeiture
Page 3
Transfer to
Capital
Reserve
Reissue
Forfeiture
Forfeiture of Shares
The term “Forfeit” actually means taking away of
property on the breach of a conditions.
It is very common that one or more shareholders fail
to pay their allotment or calls on the due dates.
Failure to pay the call money results in forfeiture of
shares.
Forfeiture of shares is the action taken by a company
to cancel the shares.
Page 4
Transfer to
Capital
Reserve
Reissue
Forfeiture
Forfeiture of Shares
The term “Forfeit” actually means taking away of
property on the breach of a conditions.
It is very common that one or more shareholders fail
to pay their allotment or calls on the due dates.
Failure to pay the call money results in forfeiture of
shares.
Forfeiture of shares is the action taken by a company
to cancel the shares.
Forfeiture of Shares
Accounting
Before passing the entries on forfeiture – students
– we must collect the following information
1. Amount Called up
2. Amount paid up
3. Amount Un-paid
Page 5
Transfer to
Capital
Reserve
Reissue
Forfeiture
Forfeiture of Shares
The term “Forfeit” actually means taking away of
property on the breach of a conditions.
It is very common that one or more shareholders fail
to pay their allotment or calls on the due dates.
Failure to pay the call money results in forfeiture of
shares.
Forfeiture of shares is the action taken by a company
to cancel the shares.
Forfeiture of Shares
Accounting
Before passing the entries on forfeiture – students
– we must collect the following information
1. Amount Called up
2. Amount paid up
3. Amount Un-paid
Forfeiture of Shares
Accounting
For eg – Mr. X holds 500 shares of ? 10 each, fully
called up. He did not pay first and final call of 4 per
share. He has already paid application of ? 2 and
allotment of ? 4 per share
Solution
500 x 10
2 4
10
6
4
4
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FAQs on PPT - Forfeiture and Reissue of Shares - 2 - Principles and Practice of Accounting - CA Foundation
| 1. What is forfeiture of shares? |  |
Ans. Forfeiture of shares refers to the process of canceling or nullifying a shareholder's ownership rights and entitlements over the shares due to non-payment of the required amount. In such cases, the company has the right to forfeit the shares and treat them as its own property.
| 2. What are the reasons for the forfeiture of shares? | |
Ans. Shares can be forfeited for various reasons, including non-payment of calls on shares, failure to provide necessary documents or information, non-compliance with the terms and conditions mentioned in the share subscription agreement, or any other violation of the company's rules and regulations.
| 3. Can a forfeited share be reissued? | |
Ans. Yes, forfeited shares can be reissued by the company. After the shares are forfeited, the company has the option to reissue them to new shareholders or sell them to existing shareholders. However, the reissuance of forfeited shares needs to follow the guidelines and regulations set by the Companies Act and the company's articles of association.
| 4. What is the procedure for reissuing forfeited shares? | |
Ans. The procedure for reissuing forfeited shares involves the following steps:
1. The board of directors must pass a resolution to reissue the forfeited shares.
2. The company should offer the reissued shares to existing shareholders in proportion to their existing shareholding.
3. If the existing shareholders do not accept the offer, the company can sell the reissued shares to new shareholders.
4. The company must comply with all legal requirements, such as filing necessary documents with the registrar of companies and updating the share register.
| 5. What are the implications of forfeiture and reissue of shares for shareholders? | |
Ans. Forfeiture and reissue of shares can have several implications for shareholders.
1. For the shareholder whose shares are forfeited, they lose their ownership rights, including voting rights and entitlement to dividends.
2. For existing shareholders, the reissue of forfeited shares may dilute their ownership percentage and reduce their control over the company.
3. For new shareholders, purchasing reissued shares provides an opportunity to acquire ownership in the company. However, they need to consider the company's financial health and future prospects before investing.
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