When and how shares of a company are forfeited?
Forfeiture of shares means to cancel and withdraw the share certificate once issued by the company to any shareholder. If any shareholder certain number of share fails to pay the amount due on his/her shares as called by the board of directors, his/her shares will be forfeited . When shares are forfeited , the amount already paid by the defaulter is not refundable and will be the capital gain to the company.
Before forfeiture of shares the directors have to issue notice to the shareholder. According to the Company Act, 2063 in case any shareholder fails to pay the amount due on shares within the specified time limit. the time for payment shall be extended by additional three months by giving the proper notice to such a shareholder stating clearly that the payment on shares shall be accepted along with the interest as prescribed within the extended time and shares shall be forfeited if payment of due amount is not made within extended time. Such notice shall be published at least three times in the national level daily newspaper in the case of public limited company. If the payment on shares is not made even within the time, the company forfeits the amount already paid for against the value of shares.