Forfeiture of shares is a process that a company undertakes when a shareholder fails to pay the calls on shares. Here are the steps to explain this process:

1. Issue of Shares: A company issues shares to raise capital. When an investor buys these shares, they become a shareholder in the company.

2. Calls on Shares: After the shares are issued, the company may make "calls" on the shares, asking the shareholders to pay more money. This is usually done when the company needs more capital.

3. Failure to Pay: If a shareholder fails to pay the amount requested in the call on shares, the company may choose to forfeit their shares.

4. Forfeiture of Shares: This is the process where the shareholder's rights to the shares are taken away by the company due to non-payment of calls on shares. The shares are then cancelled, and the shareholder loses all rights and benefits associated with those shares.

5. Resale of Forfeited Shares: The company may then choose to reissue or resell the forfeited shares to recover the unpaid amount.

6. Legal Implications: The process of forfeiture of shares must be done according to the rules and regulations set out in the company's articles of association and the laws of the country. If not done correctly, it could be deemed illegal.

In summary, forfeiture of shares is a punitive action taken by a company against a shareholder who fails to fulfill their financial obligations towards the company.

Question

Forfeiture of shares is a process that a company undertakes when a shareholder fails to pay the calls on shares. Here are the steps to explain this process:

1. Issue of Shares: A company issues shares to raise capital. When an investor buys these shares, they become a shareholder in the company.

2. Calls on Shares: After the shares are issued, the company may make "calls" on the shares, asking the shareholders to pay more money. This is usually done when the company needs more capital.

3. Failure to Pay: If a shareholder fails to pay the amount requested in the call on shares, the company may choose to forfeit their shares.

4. Forfeiture of Shares: This is the process where the shareholder's rights to the shares are taken away by the company due to non-payment of calls on shares. The shares are then cancelled, and the shareholder loses all rights and benefits associated with those shares.

5. Resale of Forfeited Shares: The company may then choose to reissue or resell the forfeited shares to recover the unpaid amount.

6. Legal Implications: The process of forfeiture of shares must be done according to the rules and regulations set out in the company's articles of association and the laws of the country. If not done correctly, it could be deemed illegal.

In summary, forfeiture of shares is a punitive action taken by a company against a shareholder who fails to fulfill their financial obligations towards the company.

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