Steps for Forfeiture of Shares- (A) Issue of Prospectus (B) Shares Fo…

Steps for Forfeiture of Shares-

(A) Issue of Prospectus

(B) Shares Forfeiture

(D) Allotment of Shares

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → (A), (C), (D), (B)

Shares can be forfeited only after they have been issued and allotted and the holder has failed to pay what is due, so forfeiture is the last step.

(A) Issue of Prospectus — the company first invites the public to buy its shares through a prospectus.

(C) Receipt of Application — investors apply on the basis of the prospectus and send the application money.

(D) Allotment of Shares — once minimum subscription is received, the company allots shares and asks for allotment money, followed by calls.

(B) Shares Forfeiture — if a shareholder fails to pay allotment or call money, his shares are cancelled and the amount already received is kept by the company.

NCERT (2026-27 edition):
Issue of Shares – “… The important steps in the procedure of share issue are : • Issue of Prospectus: The company first issues the prospectus to the public. Prospectus is an invitation to the public that a new company has come into existence and it needs funds for doing business.”

NCERT (2026-27 edition):
Issue of Shares – “… • Receipt of Applications: When prospectus is issued to the public, prospective investors intending to subscribe the share capital of the company would make an application along with the application money and deposit the same with a scheduled bank as specified in the prospectus.”

NCERT (2026-27 edition):
Allotment of Shares – “… If minimum subscription has been received, the company may proceed for the allotment of shares after fulfilling certain other legal formalities.”

NCERT (2026-27 edition):
Forfeiture of Shares – “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.”