Shares are forfeited because only a part of the due amount of such shares is received and the balance remains unpaid. On forfeiture the membership of the original allottee is cancelled. … Such sale of shares is called ‘reissue of shares’. Thus reissue of shares means issue of forfeited shares.
What do you mean by forfeiture and reissue of shares?
If shares are forfeited the membership of the shareholder stands cancelled and the shares become the property of the company. Thereafter, the company has an option of selling such forfeited shares. The sale of forfeited shares is called ‘reissue of shares’.
What is the forfeiture of shares?
A forfeited share is an equity share investment which is cancelled by the issuing company. A share is forfeited when the shareholder fails to pay the subscription money called upon by the issuing company.
How are the shares forfeited and reissued give example?
For example, A pays the application amount of ₹3 on 100 shares of the face value ₹10. But, he fails to pay the allotment money. The company forfeits his shares and re-issues them. Now, the amount in arrear is ₹7 per share.
What is the procedure for reissue of forfeited shares?
Ascertain that Articles of Association authorize Board to reissue forfeited shares. Check and ensure Board Resolution passed by the Board of Directors at meeting for forfeiture and re-issue are accurate. Ensure correct accounting entries for forfeiting and re-issue.
How do you calculate profit on reissue of forfeited shares?
At the time of reissue of forfeited shares a discount of Rs 2 per share is allowed so the total amount of discount of Rs 400 is adjusted from the forfeited amount of Rs 600 and the balance amount of Rs 200 is transferred to Capital Reserve A/c being a capital gain.
What are the two effects of forfeiture of shares?
(i) The name of the defaulting shareholder is removed from the register of members. It means he is no longer a shareholder of the company. (ii) The amount already paid by the defaulting shareholder is forfeited and such amount is transferred to Forfeited Shares Account.
Can forfeited shares be Cancelled?
Forfeited shares are held by the company and can then be sold, re-allotted, cancelled or otherwise disposed of as the directors think fit. … At any time before the company disposes of or cancels forfeited shares, the directors may decide to cancel the forfeiture on payment of all calls and interest due on the shares.
What is the result of forfeiture of shares?
This contract makes it binding upon the shareholder to pay-up the amount due on the issue price of the share when company calls for it through the call on shares. … Shares which are forfeited will no longer remain the shares of that shareholder. The money paid by that shareholder is also not refundable by the company.
What is the minimum price at which a company can reissue its forfeited shares?
Amount equal to the unpaid amount on the forfeited shares/calls-in-arrears.
What is the reissue of shares?
Reissue of shares simply means issue of share again. Due to numerous reasons a company may forfeit shares of their shareholders. Most common case is due to default in installments such as allotment money or calls. These forfeited are thus supposed to be reissued.
How can profit on reissue of forfeited shares be treated in accounts?
If a Company makes any loss on reissue of shares, such loss is made good by making adjustments by debiting the Forfeited Shares Account. The balance remaining the forfeited Share Account is a capital profit and it must be transferred to Capital Reserve Account.