Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion: Forfeiture of a share refers to the cancellation or termination of membership of a shareholder by taking away the shares and rights of membership.
Reason: Forfeited shares can be reissued at a discount.
Answer & explanation
Correct answer: option 2
It may happen that some shareholders fail to pay one or more instalments, viz. allotment money and/or call money. In such circumstances, the company can forfeit their shares, i.e. cancel their allotment and treat the amount already received thereon as forfeited to the company within the framework of the provisions in its articles. These provisions are usually based on Table F which authorize the directors to forfeit the shares for non-payment of calls made.