Consider the given steps below related to forfeiture of shares due to…

Consider the given steps below related to forfeiture of shares due to non receipt of allotment money and their re-issue and arrange them in correct sequence:

(A) Reissue of forfeited shares and transfer of gain on reissue of forfeited shares.

(B) Notice to shareholder regarding non-payment of allotment money and call money.

(D) Forfeiture of shares for non-payment of allotment and call money.

Choose the correct sequence of the above steps from the options given below:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → (C), (B), (D), (A)

Forfeiture is the company’s answer to a shareholder’s default, so the steps follow the default and the legal process after it.

(C) Non-payment of allotment money and call money by shareholder — comes first, since it is the default that sets the process going.

(B) Notice to shareholder regarding non-payment of allotment money and call money — follows, because the company must give the shareholder a chance to pay before it can act.

(D) Forfeiture of shares for non-payment of allotment and call money — comes only after the notice period has passed without payment.

(A) Reissue of forfeited shares and transfer of gain on reissue of forfeited shares — is last, since only shares already forfeited can be reissued, and the gain left in the forfeiture account goes to Capital Reserve after the reissue.

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. These provisions are usually based on Table F which authorise the directors to forefeit the shares for non-payment of calls made. For this purpose, they have to strictly follow the procedure laid down in this regard.”

NCERT (2026-27 edition):
Reissue of Forfeited Shares – “The directors can either cancel or re-issue the forefeited shares. In most cases, they reissue such shares which may be at par, at premium or at a discount. … The balance, if any, left in the Share-Forfeited Account relating to reissued Shares, should be treated as capital profit and transferred to Capital Reserve Account.”