A company share, also known as a stock or a share of stock, represents ownership in a company. When a company issues shares of stock, it is dividing ownership of the company among its shareholders. Each share represents a portion of ownership in the company, and the total number of shares outstanding represents the entire ownership of the company.
Shareholders are entitled to certain rights, including the right to vote on important matters such as the election of the board of directors and major corporate actions such as mergers or acquisitions. Additionally, shareholders may receive dividends if the company decides to distribute a portion of its profits to its shareholders.
Shares of stock are bought and sold on stock exchanges, and the price of a share can fluctuate based on a variety of factors such as the performance of the company, industry trends, and market conditions.
Forfeited of shares
Forfeited shares refer to shares that have been canceled by a company due to the failure of a shareholder to meet certain obligations or requirements. For example, if a shareholder fails to pay for the shares they have subscribed for, the company may decide to forfeit those shares.
When shares are forfeited, they are canceled by the company and no longer represent ownership in the company. Any amount paid by the shareholder for the forfeited shares is typically forfeited as well and retained by the company.
Forfeited shares may be reissued by the company at a later time, either to new or existing shareholders. The reissue of forfeited shares may require shareholder approval and compliance with relevant laws and regulations.
The forfeiture of shares is one of the ways that companies can enforce compliance with their bylaws and rules. It can also be a way for companies to raise additional capital by reissuing forfeited shares to new shareholders.
Reasons for forfeiting shares can vary, but some common reasons include:
- Failure to pay for shares: If a shareholder fails to pay for the shares they have subscribed for, the company may decide to forfeit those shares.
- Breach of shareholder agreement: If a shareholder breaches the terms of a shareholder agreement, the company may decide to forfeit their shares.
- Non-compliance with company rules: If a shareholder violates the company’s rules or bylaws, the company may decide to forfeit their shares.
- Non-compliance with regulatory requirements: If a shareholder fails to comply with regulatory requirements related to share ownership, such as disclosure requirements, the company may decide to forfeit their shares.
- Death of a shareholder: If a shareholder dies and their estate does not transfer the shares to a new owner, the company may decide to forfeit the shares.
Types of forfeited shares can also vary, but some common types include:
- Ordinary shares: These are the most common type of shares and represent ownership in a company.
- Preference shares: These shares typically have priority over ordinary shares when it comes to receiving dividends and in the event of a liquidation.
- Redeemable shares: These shares can be redeemed by the company at a later time for a specified amount.
- Non-voting shares: These shares do not carry voting rights but may still be entitled to receive dividends.
- Convertible shares: These shares can be converted into a different type of share at a later time, such as from non-voting to voting shares.
Re-issue of forfeited shares
Re-issuing of forfeited shares means that the shares that have been forfeited by the company are again made available for sale to new or existing shareholders. Re-issuing forfeited shares can help companies raise additional capital by selling these shares to new investors or it can be used to transfer ownership to existing shareholders who wish to purchase them.
Before re-issuing forfeited shares, a company must comply with the relevant legal and regulatory requirements, including obtaining shareholder approval, if required. The process for re-issuing forfeited shares may vary depending on the laws and regulations of the jurisdiction in which the company is incorporated.
When re-issuing forfeited shares, the company may need to determine the value of the shares based on the prevailing market conditions and any changes in the company’s financial position since the shares were forfeited. The company may also need to ensure that the shares are offered for sale in compliance with securities laws and regulations.
Re-issuing forfeited shares can be a way for companies to raise additional capital without having to issue new shares or dilute the ownership of existing shareholders. It can also be a way to re-balance the ownership structure of the company or to bring in new investors who may be interested in purchasing shares at a discounted price. However, it’s important for companies to carefully consider the legal and financial implications of re-issuing forfeited shares before taking any action.
Re-issue of forfeited shares steps and laws in india
In India, the re-issuing of forfeited shares is governed by the Companies Act, 2013 and the rules made thereunder. The process for re-issuing forfeited shares typically involves the following steps:
- Examination of Articles of Association: The Articles of Association of the company should be examined to ensure that they contain provisions relating to the re-issue of forfeited shares.
- Board resolution: The board of directors of the company should pass a resolution approving the re-issue of forfeited shares. The resolution should specify the number of shares to be re-issued, the price at which the shares will be offered, and the terms and conditions of the re-issue.
- Notice to Shareholders: The company should give notice to its existing shareholders of its intention to re-issue forfeited shares. The notice should specify the number of shares to be re-issued, the price at which the shares will be offered, and the terms and conditions of the re-issue.
- Offer of re-issued shares: The company should make an offer of re-issued shares to the shareholders in proportion to their existing shareholding, unless the Articles of Association of the company provide for otherwise.
- Approval by Shareholders: The shareholders should approve the re-issue of forfeited shares at a general meeting of the company. The approval should be obtained by way of an ordinary resolution.
- Filing with Registrar of Companies: The company should file the necessary forms and documents with the Registrar of Companies within 30 days of the re-issue of forfeited shares.