Red Tubes Ltd. has made a demand on its shareholders to pay the balance unpaid amount of ₹ 20/- per share (having a face value of ₹ 100) held by them. - Secretarial Practice

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Short Note

Study the following case/situation and express your opinion.

Red Tubes Ltd. has made a demand on its shareholders to pay the balance unpaid amount of ₹ 20/- per share (having a face value of ₹ 100) held by them. The company has sent letters asking the shareholders to pay the money to its Bankers within the specified time.

  1. Are the shareholders liable to pay ₹ 20 for the shares held by them?
  2. Name the letter sent by the company to its shareholders asking them to pay ₹ 20/-
  3. What happens if a shareholder fails to pay the money within the specified time?
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Solution

  1. Yes. The shareholders are liable to pay ₹ 20 for the shares held by them. This is because it is the responsibility of every shareholder to pay the call money as demanded by the company.
  2. The company has to send the call letter to shareholders for the payment of call money. This letter is sent by ordinary post.
  3. If a shareholder fails to pay the money within the specified time, then the company sends a warning letter and after that, the company can forfeit (cancel) the shares of the shareholders.
Concept: Forfeiture of Shares
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Chapter 3: Issue of Shares - Exercises [Page 66]

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Balbharati Secretarial Practice 12th Standard HSC Maharashtra State Board
Chapter 3 Issue of Shares
Exercises | Q 3. 4. | Page 66

RELATED QUESTIONS

The balance of Share Forfeiture A/c is transferred to _________ account after re-issue of these share.


When shares are forfeited the Share Capital Account is _________.


State true or false with reason.

Directors can forfeit the shares for any reason.


State whether you agree or disagree with following statement:

Directors can re-issue forfeited shares.


Answer in one sentence only.

What is Forfeiture of Shares?


One shareholder holding 500 equity shares paid share application money @ ₹ 3 Allotment money @ ₹ 4 per share and failed to pay final call of ₹ 3 per share, his shares were forfeited. Calculate the amount of share forfeiture.


Pass Journal entries for the forfeiture and re-issue of shares in the following cases.

A) Asha Ltd. forfeited 100 equity shares of ₹ 20 each fully called up for non-payment of first call of ₹ 3 per share and final call of ₹ 5 per share. 80 shares of these were reissued at ₹ 15 per share fully paid

B) Bhakti Ltd. forfeited 100 equity shares of ₹ 10 each, ₹ 6 called-up on which the shareholder paid application and allotment of ₹ 5 per share. Of these 80 shares were re-issued as fully paid-up for 16 per share.

C) Konark Ltd. forfeited 50 shares of ₹ 10 each, ₹ 8 called-up. The shareholder failed to pay first call of ₹ 3 per share. Later on 30 shares of these were re-issued at ₹ 7 per share.


Select the correct answer from the options given below and rewrite the statement.

Company can ______ shares on non-payment of calls.


Write a word or a term or a phrase which can substitute the following statement.

Penal action taken by company on non-payment of calls.


State whether the following statement is true or false.

Only fully paidup shares can be forfeited.


Complete the sentence.

Company can forfeit only ______ paid shares.


Answer in one sentence.

When can a company forfeit shares?


Correct the underlined word and rewrite the following sentence.

Only fully paid up shares can be forfeited.


Explain the following term/concept.

Forfeiture of shares


Study the following case/situation and express your opinion.

X owns 100 shares while Y owns 500 shares of Red Tubes Ltd. The company has asked all its shareholders to pay the balance unpaid amount of ₹ 20. X pays the full money demanded by the company. Y, who is in a bad financial position is unable to pay any money.

  1. Can the company forfeit the shares of Y?
  2. Can the company forfeit the shares of X?
  3. Can X transfer his shares?

Answer in brief.

What are the effects of forfeiture of shares?


Justify the following statement.

Board of Directors have the authority to forfeit shares.


Vraj Ltd. issued 40,000 equity shares of ₹ 20 each payable as follows:

On Application: ₹ 4

On Allotment: ₹ 6

On First Call: ₹ 6

On Second Call: ₹ 4

The company received applications for 50,000 equity shares. Allotment of shares was made on pro-rata basis. Share allotment and calls were made and as also received except Ravi holding 100 shares failed to pay both the calls. His shares were forfeited after second call.

Record the above transactions in the books of Vraj Ltd.


The Subscribed Capital of Parag Limited is 30,000 equity shares of ₹ 100 each and 50,000 preference shares of ₹ 100 each. On both of these shares ₹ 80 per share were called-up.

The Directors forfeited 500 equity shares held by Ashish who failed to pay First and Second Call each of ₹ 20 per share. They also forfeited 500 preference shares of Ashok who failed to pay ₹ 20 per share on Allotment, ₹ 20 per share on First call and ₹ 20 per share on Second call.

The Director re-issued these forfeited shares of Ashish at ₹ 60 per share, ₹ 80 paid up and those of Ashok at ₹ 72 per share ₹ 80 paid up. All re-issued shares were taken up by Anagha.

Pass Journal entries to record the forfeiture and re-issue of shares in the books of Parag Ltd.


Only fully paid-up shares can be forfeited.


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