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in Corporate Law
Asked May 30, 2017

Cancellation of partially allotted shares

  • 1 Answer

Can a company cancel the allotment of partially paid shares. A company issued 500000 shares to one person and took application money @Rs.2 and Rs 8 being uncalled. Return of allotment is filed now the shareholder is not willing to take all the shares. Instead he is saying he can pay only Rs.400000. Please suggest if it is possible to entertain such request and how.

Answer 1

Since the return of allotment is already filed, further actions regarding the defaulter's shares is at the discretion of the company. A company has the option of either canceling or forfeiting the shares. The company may also decide to sell the shares at a discount if the option looks profitable in the long run.

Big companies usually prefer cancellation of shares along with refund of the already paid up amount. This establishes the strength and good will of the company in the market.

In cases of economic crisis, companies may also opt to forfeit the shares of the holder who fails to make payment after a call or as otherwise laid down in the Articles of Association of the company. However, for forfeiture of shares the directors must be given such power via the Articles. Prior to forfeiture of shares a notice shall be sent to the defaulter specifying a further date for payment beyond which his shares would be forfeited. Pursuant to the forfeiture, the share holder loses all rights in the company and the company may resell the shares as per the directions of the Board.

Agree Comment 0 Agrees over 3 years ago

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