Surrender Of Shares,forfeiture Of Shares, Transmission Of Shares

Presented By Supreetha Shetty

Surrender Of Shares
When share holder of a company voluntarily gives up his shares in favour of the company, he is said to have surrendered them to the company.

Surrender of shares by a member to the company is valid in the following cases:

In Case Partly Paid Shares Where Forfeiture Is Called For: Where article gives power to the directors to accept surrender of shares and it is accepted in case of partly paid shares to save the company from going through the formalities of forfeiture, the surrender is valid. Any provision in the articles for the acceptance of surrender in other circumstances is invalid.

 In Case Of Fully Paid Shares , Where They Are Exchanged For New Shares:
Where surrender of shares is in accordance with the Articles and accepted in case of fully paid shares in exchange for new shares of the same nominal value and the surrendered shares remain capable of re issue, the surrender is valid

surrendered shares can be validly reissued in the same way as forfeited shares, if the Articles authorise their re issue.

Forfeiture of shares
Forfeiture means depriving a person of his property as a penalty for some act or omission . The company may forfeit the shares of a share holder for non payment of some call/ calls if the following conditions are satisfied: 1. In Accordance With Articles : A forfeiture must be authorised by the provisions of the articles are strictly complied with.

2.Notice Prior To Forfeiture: Before shares can be forfeited, the company must serve a notice on the defaulting shareholder requiring payment of the unpaid call together with any interest which may have accrued.(Article 29 of table A ).
The notice must-

Give not less than 14 days time from the date of notice for the payment of the amount due .
a) and

b)State that in the event of non- payment of the amount due within the period mentioned in the notice, the shares in respect of which the call was made will be liable to be forfeited.
must also specify

> The exact amount due from the share holder.

3.Resolution of the board : If the defaulting shareholder does not pay the amount within the specified time as required by the notice, the directors must pass a resolution forfeiting the shares . 4.Good faith: the power to forfeit shares must be exercised by the directors in good faith and for the

Effect of forfeiture
a) cessation of membership: A person whose shares have been forfeited ceases to be a member in respect of the forfeited shares . But notwithstanding the forfeiture he remains liable to pay to the company all moneys which, at the date of forfeiture , were payable by him to the company in respect of the shares . b) Cessation of liability the liability of the person whose shares have been forfeited ceases if and when the company receives payment in full of all such money in respect of the shares.

TRANSMISSION OF SHARES Any person who becomes a nominee by virtue of the provisions of [sec 109-A],upon the production of such evidence as may be required by the Bored of directors, may elect, eithera). To be registered himself as holder of the shares or debenture, as the case may be; or b).To make such transfer of the shares or debenture as the deceased shareholder or debenture holder could have made Right to decline: The Board shall, in the above cases, have the right to decline or suspend registration as it would have had, if the deceased shareholder or debenture- holder had transferred the share or debenture, before his death.

Right of the nominee: If the person, being a nominee, so becoming entitled, elects to be registered as holder of the shares or debenture himself, he shall deliver or send to the company a notice in writing signed by him stating that he so elects. Such notice shall be accompanied with the death certificate of the deceased shareholder- holder. Dividend:
A person, being a nominee, becoming entitled to a share or debenture by reason of the death of the holder, shall be entitled to the same dividends and advantages to which he would be entitled if he were the registered holder of the share or debenture. But he shall not be entitled , before being registered as a member, to exercise any right conferred by membership in relation to meetings of the company

Notice by the board : The Board of directors may, at any time, gives notice requiring the person becoming entitled to a share or debenture by reason of the death of the holder to elect either to be registered himself or to transfer the share or debenture. If the notice is not complied with within 9o days, the bored may thereafter withhold payment of all dividends or bonuses or other moneys payable in respect of the share or debenture, until the requirements of the notice are complied with[provision to sec . 109(5)].