Question

Can forfeited shares be re-issued at a discount? If so, to what extent? Where would you transfer the balance left in the share forfeited account after the re-issue of such shares?

Answer 1

Yes, forfeited shares can be re-issued at a discount. The discount allowed on re-issue of forfeited shares cannot exceed the amount forfeited on those shares.

Extent of Discount:

The maximum discount on re-issue = Amount forfeited per share

For example, if a shareholder paid ₹6 on a ₹10 share and it was forfeited, the maximum discount on re-issue can be ₹6.

Treatment of Balance in Forfeited Shares Account:

The balance left in the Forfeited Shares Account after re-issue is considered a capital profit and is transferred to the Capital Reserve Account.