Definition : "Share forfeiture is the process by which the directors of a company cancel the membership of share holder and remove the name of share holder from the list of members on non receipt of call money as asked by the company in accordance with the statutory procedure laid down in the articles of the company."
- Procedure of Share Forfeiture: Procedure of share forfeiture is given in the Articles of the company. The step, of the procedure are as under:
(1) Preparing List of Calls in Arrears: The Secretary prepares a list of calls on shares not paid by shareholders on the basis of pay in slips received from bank.
(2) Presenting List of Calls in Arrears before the Board of Directors: Once the list of calls in arrears is prepared, it is presented before the Board of Directors for further discussion and for taking decisions on share forfeiture.
(3) Sending Reminder to Members: Reminders are sent to those members who have not paid call money within the prescribed time limit and they are intimated to pay the amount of calls-in-arrears including interest within the time limit, now prescribed.
(4) Sending Final Reminder: If no response to first reminder is received, a final reminder is sent through registered post and such members are intimated to pay the due amount including interest within 14 days of receipt of the final reminder. They are also warned of forfeiture of shares on failure in paying the due amount.
(5) Resolution of Share Forfeiture: Shares of those members who do not pay the amount of call within 14 days are forfeited by passing a resolution in the meeting of Board of Directors.
(6) Sending notice of Share Forfeiture: The Secretary sends notices of share forfeiture on the basis of the resolution passed in the meeting of Board of Directors. A copy of resolution of share forfeiture is also enclosed the notice and Members are intimated to surrender the share certificate to the company.
(7) Issuing Public Notice: The Secretary gives a public notice in the newspapers indicating serial numbers of shares forfeited so no transaction is carried out on such shares.
(8) Making Entries in the Register of Members: After giving a public notice, the secretary makes entries in the Register of Members regarding share forfeiture and names of members, whose shares are forfeited, are cancelled from the list.