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Question
Justify the following statement.
Board of Directors have the authority to forfeit shares.
Solution
Justification:
- Forfeiture of shares is a process where the company forfeit the shares of a member or shareholder who fails to pay the call on shares or instalments of the issue price of his shares within a certain period of time after they fall due.
- In other words, when the shareholder fails to pay the full amount of share which he agreed to pay in instalments the company can cancel his shares.
- If a shareholder fails to pay calls on shares within a certain period, the Board of Directors, if authorised by the Articles of Association, can forfeit i.e. take away the ownership of a member.
- The company will give 14 days' notice after 14 days if the shareholder does not pay the company will forfeit his shares and strike his name from the register of shareholders. Thus, it is rightly justified that, Board of Directors has the authority to forfeit shares.
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RELATED QUESTIONS
The balance of Share Forfeiture A/c is transferred to _________ account after re-issue of these share.
Answer in one sentence only.
What is Forfeiture of Shares?
One shareholder holding 500 equity shares paid share application money @ ₹ 3 Allotment money @ ₹ 4 per share and failed to pay final call of ₹ 3 per share, his shares were forfeited. Calculate the amount of share forfeiture.
Pass Journal entries for the forfeiture and re-issue of shares in the following cases.
A) Asha Ltd. forfeited 100 equity shares of ₹ 20 each fully called up for non-payment of first call of ₹ 3 per share and final call of ₹ 5 per share. 80 shares of these were reissued at ₹ 15 per share fully paid
B) Bhakti Ltd. forfeited 100 equity shares of ₹ 10 each, ₹ 6 called-up on which the shareholder paid application and allotment of ₹ 5 per share. Of these 80 shares were re-issued as fully paid-up for ₹ 6 per share.
C) Konark Ltd. forfeited 50 shares of ₹ 10 each, ₹ 8 called-up. The shareholder failed to pay first call of ₹ 3 per share. Later on 30 shares of these were re-issued at ₹ 7 per share.
Write a word or a term or a phrase which can substitute the following statement.
Penal action taken by company on non-payment of calls.
State whether the following statement is true or false.
Only fully paidup shares can be forfeited.
Complete the sentence.
Company can forfeit only ______ paid shares.
Correct the underlined word and rewrite the following sentence.
Only fully paid up shares can be forfeited.
Explain the following term/concept.
Forfeiture of shares
Answer in brief.
What are the effects of forfeiture of shares?
Vraj Ltd. issued 40,000 equity shares of ₹ 20 each payable as follows:
On Application: ₹ 4
On Allotment: ₹ 6
On First Call: ₹ 6
On Second Call: ₹ 4
The company received applications for 50,000 equity shares. Allotment of shares was made on pro-rata basis. Share allotment and calls were made and as also received except Ravi holding 100 shares failed to pay both the calls. His shares were forfeited after second call.
Record the above transactions in the books of Vraj Ltd.
Only fully paid-up shares can be forfeited.
Find the odd one.
