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of Forfeited Shares
Forfeited shares refer to shares that a company has taken back from a shareholder
due to non-payment of dues or other contractual breaches. This introductory
section outlines the process and benefits of reissuing these forfeited shares.
Definition of Forfeited Shares
Forfeited shares are those that a company has reclaimed from a shareholder,
typically because the shareholder failed to pay the full amount owed for the
shares. The company then has the option to reissue these shares to new or
existing shareholders.
Reasons for Forfeiture of Shares
1 Non-Payment of Calls 2 Breach of Contract
Shareholders failing to pay the full Violation of the company's articles of
amount due for their shares can result in association or other contractual
forfeiture. obligations can also lead to share
forfeiture.
3 Disciplinary Action
In some cases, a company may forfeit shares as a disciplinary measure against a shareholder.
Process of Reissue of Forfeited Shares
1 Notice
The company must provide notice to the shareholder of its intent to forfeit the
shares.
2 Forfeiture
Upon non-response, the company can officially forfeit the shares.
3 Reissue
The forfeited shares can then be reissued to new or existing shareholders.
Accounting Treatment of Reissued
Forfeited Shares
Share Capital Profit & Loss Reserves
The reissued shares are added Any difference between the The company may also
back to the company's share forfeiture amount and reissue transfer the forfeited amount
capital account. price is recognized in the to a capital redemption reserve
profit and loss statement. or similar account.
Benefits of Reissuing Forfeited Shares
Reissue Process
A structured process of providing notice, forfeiting, and then reissuing the shares to
new or existing shareholders.
Accounting Implications
The reissued shares are recorded in the company's accounts, with any gains or losses
recognized.