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Forfeiture of Shares

Forfeiture means cancellation of the shares allotted on account of non-payment of the amount due by a shareholder. When a shareholder fails to pay the money due on allotment, the company may forfeit the amount already received on such shares. Forfeiture must be done in accordance with the articles of the company.

At least 14 days’ notice should be given before the shares are being forfeited. On forfeiture, the forfeited shares become the property of the company. One must be careful with the following three aspects while passing entries for forfeiture of shares:

  1. Amount called-up (i.e. the amount that is credited to the share capital) in respect of the forfeited shares
  2. Amount already received in respect of those shares
  3. Amount due but not received in respect of those shares

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