Difference between Forfeiture and Surrender of Shares (2024)

FAQs

Difference between Forfeiture and Surrender of Shares? ›

Forfeiture of shares refers to the situation where the allotment of shares is cancelled for the shareholders due to non-payment of any installments. In contrast to that, surrender of shares takes place when shareholders return the shares to the company for cancellation.

Where a share transfer is in writing it can be an acceptable means of transfer provided it is accepted by the director. Share surrender on the other hand, is the surrender of shares back to the company by an individual or corporate body who subscribed for shares in the company.

Forfeiture and surrender of shares are discrete theories that reflect unstable situations with precise results. Forfeiture is the condition where the company initiates the process, and in the surrender of shares, the shareholder has the control to start the proceedings.

The forfeited shares definition refers to company shares that have been surrendered or given up by a shareholder due to non-payment of the required amount. When a shareholder fails to make the necessary payments for the subscribed shares, the company has the right to forfeit or cancel them.

Forfeiture is withdrawal of shares due to non-payment of any call by the shareholder or for any other ground as may be provided in the Articles. On forfeiture of shares the member loses the amount paid thereon and his interest in the ownership of the shares.

Forfeiture of shares refers to the situation where the allotment of shares is cancelled for the shareholders due to non-payment of any installments. In contrast to that, surrender of shares takes place when shareholders return the shares to the company for cancellation.

When a shareholder feels that he cannot pay further calls; he may himselfsurrender the shares to the company. These shares are then cancelled.

When a share is forfeited, the shareholder no longer owes any remaining balance and surrenders any potential capital gain on the shares, which automatically revert back to the ownership of the issuing company.

Forfeiture of shares occurs when a shareholder fails to pay the call money by the due date, leading to the company reclaiming the shares. This process results in the shareholder losing all rights and benefits associated with the forfeited shares.

Surrender of shares is a process in which a shareholder voluntarily returns their shares to the company, usually because they cannot pay for future calls on the shares. It is similar to forfeiture, but instead of the company taking action to reclaim the shares, the shareholder initiates the process.

How do you treat forfeiture of shares? ›

When Forfeiture of shares Issued at Par. In this case, 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.

After the shares are forfeited, the company can re-issue the shares, in this case it is known as re-issue of forfeited shares or reissue of shares. For reissue of shares, the company can conduct an auction and dispose of the shares.

These shares can be reissued at par, at premium or at discount. Generally, these shares are reissued at a discount i.e. at a price which is less than its nominal value. The amount of discount allowed at the time of reissue in no case should be more than the amount forfeited on such shares.

Surrender of shares is a process in which a shareholder voluntarily returns their shares to the company, usually because they cannot pay for future calls on the shares. It is similar to forfeiture, but instead of the company taking action to reclaim the shares, the shareholder initiates the process.

A share transfer is the process of transferring existing shares from one person to another; either by sale or gift. This article will cover how to transfer existing shares within your company, a guide for allotting shares can be found here.

Surrender of shares means the return of shares by the shareholder to the company for cancellation voluntarily. The legal effects of surrender as well as forfeiture are similar. The amount already paid on such shares is also confiscated and these can also be reissued in same way.

What is transfer of shares? Transfer of shares is when the ownership of the shares is transmitted from the current holder to another person. The owner can do this at any point to raise working capital or re-organise their investment structure. It makes it easier for a shareholder to see all their shares together.