Title- Reissue of Forfeited Shares

Introduction

Issue of Forfeited Shares is a provision given by many companies in their Articles of Association. A company may want to give these provisions to its members in order that the member who cannot pay the instalment on time will not be penalised for losing his shares. Instead, he gets another chance to pay the balance amount, and his shares are not forfeited but suspended till such time he pays. In this article, we discuss how shares can be reissued after they were issued at first, then forfeited for non-payment and then got reissued again.

What is the meaning of Forfeited Stock?

Forfeited stock is generally an equity share that is cancelled by the issuing company. A stock is forfeited when the shareholder fails to pay the subscription money called upon by the issuing company. A company with a high level of shareholder delinquency may declare shares to be forfeited. The bylaws specify how long after the date of payment the forfeiture takes place, usually about 30 days or more. The process for reissuing stock is to include it in the proxy statement and vote before sending any funds to shareholders. This action removes the person from the shareholder list and returns the certificate to the corporation, clean and ready for reissue.

What is the Reissue of Forfeited Shares?

Reissue of forfeited shares meaning can be explained in this way: When a member of the company, where shares have been allotted at par or premium has not paid the allotment money (i.e. the share capital amount), the shares become liable for forfeiture and the company forfeits them by passing a resolution in its Board Meeting. The Board may reissue these forfeited shares on such terms as it thinks fit.

How to Calculate Profit from Reissue of Forfeited Shares?

You must calculate the payable income tax for the Reissue of forfeited shares. which is defined as the amount realised from the Reissue of forfeited shares minus the price paid.

The profit from the reissue of forfeited shares can be calculated with the following formula:

Number of shares reissued X share price = Profit

if the forfeited shares are reissued at a price higher than the amount of the forfeiture it will create a loss. If the reissue is at the same forfeiture price, the company will break even. If the reissue is less than the forfeiture price, there will be a profit if shares were reissued for less than the par value.

Issue Forfeiture and Reissue of Forfeited Shares

Issue forfeiture is the process by which a company cancels shares of stock that have been issued but not fully paid for. issue forfeiture may occur when a company that has issued share options to an employee or director takes those shares back from the recipient. The recipient of the forfeited shares thus gets no new shares but is not required to pay any further money for them.

Reissue of forfeited shares means increasing the market value of shares by investors. It means that the company re-issues the shares to those members who did not pay the first call within due time.

Reissue of forfeited shares can be made in a company during the accounting year. But in case, the forfeiture is made after the balance sheet date of that financial year, then the reissue of forfeited shares can be made only at the beginning of the next financial year. Such a reissue occurs without requiring previous approval from shareholders.

Partial Reissue of Forfeited Shares

Partial reissue of forfeited shares is the process of returning some of the shares or a company that has been forfeited to the company. It is a situation in which a company repurchases outstanding shares that were previously forfeited.

Partial reissue of forfeited shares is the reintroduction of altered share certificates to shareholders when they fail to timely part with their certificates by corporate entities. Reissue of forfeited shares is done in a manner that will favour the shareholders and their reason for failing to make use of the shares.

Conclusion

The process to reissue shares after being forfeited is relatively simple. The request is made by the shareholder or the lawful representative of a deceased shareholder, and once it’s received by the company, it is typically reissued. If there is no proof that the shares were not lost or stolen, then they should be able to be reissued.