Difference between Forfeiture and Surrender of Shares

Overview

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When it comes to share transactions, two terms often create confusion - forfeiture of shares and surrender of shares. Forfeiture of shares takes place when the company revokes the allotment of shares due to the shareholders' failure to make payment. On the other hand, surrender of shares is a situation where shareholders voluntarily return their shares to the company for cancellation.

The surrender of shares is often seen as a preferable alternative toforfeiture of shares. This is because the shares that are likely to be forfeited due to non-payment can be voluntarily surrendered by the shareholders.

It's worth noting that a company can only accept the surrender of shares if there's a provision for such an arrangement in its Articles of Association (AoA).

Now, let's delve deeper into the differences between forfeiture of shares and surrender of shares.

Forfeiture of Shares	Surrender of Shares
Definition
Forfeiture of shares is a process where the company cancels the allotment of shares due to shareholders' failure to pay the required installments.	Surrender of shares is when the shareholders willingly return their shares to the company for cancellation.
Type of Action
This is a mandatory action taken by the company.	This is a voluntary action taken by the shareholder.
Initiated by
The company initiates the forfeiture of shares.	The shareholder initiates the surrender of shares.
Reason
Forfeiture is usually due to the non-payment of call money.	Surrender typically occurs when a shareholder is unable to pay the call money.
Time Taken
The forfeiture of shares is a lengthy process.	The surrender of shares is a relatively quick procedure.
Impact on Reputation
Forfeiture of shares can negatively impact the reputation of shareholders as it is a penalty for non-payment.	Surrender of shares does not harm the reputation as it is a voluntary act.

We hope that this article has clarified the differences between forfeiture and surrender of shares. For more insightful articles on commerce-related topics, keep visiting our website.

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Frequently Asked Questions

What is the difference between forfeiture and surrender of shares?

Forfeiture of shares refers to the cancellation of allotment of shares to the shareholders by the company due to non payment of installments. On the other hand, surrender of shares refers to the voluntary act of surrender of shares by the shareholder for cancelling the allotment of shares.

What is the impact on reputation in the case of forfeiture and surrender of shares?

Forfeiture of shares impacts the reputation of the shareholders as it is a penalty that is charged on the shareholders due to non-payment of installment money. Surrender of shares does not create issues with reputation as it is a voluntary act by the shareholder.

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