Question

Describe the provision of law relating to ‘Calls-in-Arrears’.

Answer 1

Calls-in-Arrears refers to the portion of called-up capital that is unpaid by the shareholder within a specified period. In other words, call-in arrears arise when a shareholder fails to pay the sum due on allotment or on any subsequent calls. The corporation is authorised by its Articles of Association to charge interest at a defined rate on call-in arrears from the due date until the date of payment. If the Articles of Association are quiet in this regard, Table A will apply, which states that interest at 5% per year will be charged. It is subtracted from the called-up share capital on the liabilities side of the company’s balance sheet. Upon sufficient notice to shareholders, the corporation may forfeit the shares for nonpayment of the call money.