Forfeiture of Shares

Forfeiture of shares means:

• Cancellation of shares by the government

• Voluntary return of shares by shareholders

• Termination of membership due to non-payment of allotment or call money

• Transfer of shares to another company

Shares can be forfeited if the shareholder fails to pay:

• Dividend declared

• Issue price of shares

• Allotment and call money

• Bonus shares

Which document must authorize forfeiture of shares?

• Articles of Association

• Memorandum of Association

• Prospectus

• Share certificate

After forfeiture, the shares become:

• Cancelled permanently

• Owned by the company

• Reissued or sold again

• Liability of the directors

Forfeited shares can be reissued:

• Only at face value

• Only at premium

• At any price not less than the amount unpaid on the shares

• Only with SEBI permission

What is the accounting entry on forfeiture of shares originally issued at par for non-payment of final call?

• Debit Share Capital, Credit Share Forfeiture and Call in Arrears

• Debit Call in Arrears, Credit Share Capital

• Debit Bank, Credit Share Capital

• Debit Share Forfeiture, Credit Share Capital

Which of the following is not true about forfeiture of shares?

• It reduces the company's share capital

• It can be done without giving notice

• It affects the rights of the shareholder

• It must be authorized by Articles

Reissue of forfeited shares is recorded in which account?

• Share Capital Account

• Share Forfeiture Account

• Share Application Account

• Share Premium Account

The profit on reissue of forfeited shares is transferred to:

• Profit and Loss Account

• Capital Reserve Account

• General Reserve Account

• Share Premium Account

Forfeited shares can be reissued at a discount provided:

• It is approved by SEBI

• Discount does not exceed amount forfeited

• Shareholder agrees in writing

• Articles of Association are amended