Question

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

Answer 1

Calls-in-Arrears: It refers to the portion of called-up capital that is not paid by the shareholder within a particular time period. In other words, call-in arrears occurs when a shareholder fails to pay the sum due on allotment or any following calls. The corporation is authorized by its Articles of Association to impose interest at a defined rate on the amount of 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. Following sufficient notice to shareholders, the corporation may forfeit the shares due to nonpayment of the call money.