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.

Surrender of shares is a short cut procedure in order to avoid the forfeiture of shares. Shares that have the possibility of being forfeited due to defaulting in payment can be voluntarily surrendered by the shareholders.

Such a surrender of shares can be accepted by the company if there is any provision for such an arrangement in the Articles of Association (AoA) of the company.

Let us look at some of the points of difference between forfeiture of shares and surrender of shares.

Forfeiture of Shares

Surrender of Shares

Definition

Forfeiture of shares refers to the cancellation of allotment of shares to the shareholders by the company due to non payment of installments (application money or call money)

Surrender of shares refers to the voluntary act of surrender of shares by the shareholder for cancelling the allotment of shares

Type of Action

It is a compulsory action

It is a voluntary action

Initiated by

Company

Shareholder

Reason

Forfeiture occurs due to the non-payment of call money

Surrender of shares occurs due to inability of a shareholder to pay the call money

Time Taken

Forfeiture of shares takes a long time to settle

Surrender of shares is a relatively quicker process

Impact on Reputation

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

This article was all about the topic of Difference between Forfeiture and Surrender of Shares, which is an important topic for Commerce students. For more such interesting articles, stay tuned to BYJU’S.

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