Explain the term ‘Forfeiture of shares’ and give the accounting treatment on forfeiture.
Explain the term ‘Forfeiture of shares’ and give the accounting treatment on forfeiture.
Explain the term ‘Forfeiture of shares’ and give the accounting treatment on forfeiture.
If a shareholder fails to pay the allotment money and or any call money on his shares as called upon, his shares may be forfeited, if it is authorised by the Articles of Association. Cancellation of shares and forfeiting the amount received against those shares is known as forfeiture of shares.
As per Table F of the Companies Act,2013, the procedure of forfeiting shares is mentioned below:
(i) If a member fails to pay any call, or installment of a call, on the day appointed for payment, the Board of Directors of the company may, at any time thereafter during such time as any part of the call or installment remains unpaid, serve a notice on him/her requiring payment of such amount, together with any interest which may have accrued.
(ii) If the shareholder does not pay the amount, then the company has the right to forfeit his/her share by passing a resolution.
(iii) The name of the shareholder is removed from the register of members (i.e., shareholders).
Accounting Treatment for Forfeiture of shares-
(ii) Forfeiture of shares that were Issued at Premium
(a) Sometimes forfeited shares would have been issued at a premium in that case if the amount of premium is received then the premium received is not shown.
(b) Sometimes forfeited shares would have been issued at a premium in that case if the amount of premium is not received then the premium not received is shown.
If a shareholder fails to pay the allotment money and or any call money on his shares as called upon, his shares may be forfeited, if it is authorised by the Articles of Association. Cancellation of shares and forfeiting the amount received against those shares is known as forfeiture of shares.
As per Table F of the Companies Act,2013, the procedure of forfeiting shares is mentioned below:
(i) If a member fails to pay any call, or installment of a call, on the day appointed for payment, the Board of Directors of the company may, at any time thereafter during such time as any part of the call or installment remains unpaid, serve a notice on him/her requiring payment of such amount, together with any interest which may have accrued.
(ii) If the shareholder does not pay the amount, then the company has the right to forfeit his/her share by passing a resolution.
(iii) The name of the shareholder is removed from the register of members (i.e., shareholders).
Accounting Treatment for Forfeiture of shares-
(ii) Forfeiture of shares that were Issued at Premium
(a) Sometimes forfeited shares would have been issued at a premium in that case if the amount of premium is received then the premium received is not shown.
(b) Sometimes forfeited shares would have been issued at a premium in that case if the amount of premium is not received then the premium not received is shown.
