A shareholder owns 1,000 partly paid shares but fails to pay a call. Your finance team flags the unpaid amount. Can you simply remove those shares from your cap table?
The answer is no. Forfeiture of shares requires legal authority, proper notice, and a valid corporate decision. An unpaid call alone does not complete the process.
Under the Companies Act, 2013, Schedule I, Table F provides model rules for handling forfeiture. Your company’s Articles of Association (AoA) determine how those rules apply.
This guide covers the procedure for forfeiture of shares, the accounting entries, and what happens when forfeited shares are reissued. You’ll also learn which records to update and where professional review is essential.
Disclaimer: This article is for educational purposes. It does not constitute legal, accounting, or secretarial advice. Consult a qualified professional before taking corporate action.
Forfeiture of shares vs. forfeiture of ESOP options
Share forfeiture and Employee Stock Option Plan (ESOP) forfeiture sound similar, but they concern different equity rights. One involves issued shares, while the other concerns an employee’s right to acquire shares.
Here’s how these three events compare.
| Event | What the holder owns | Common trigger | Outcome |
|---|---|---|---|
| Forfeiture of shares | Already issued shares, usually partly paid | Failure to pay a valid call | Membership rights attached to the forfeited shares cease |
| Forfeiture of ESOP options | Options to acquire shares | A qualifying event under the ESOP plan | Options are handled according to plan rules |
| Lapse of ESOP options | Unexercised options | Expiry or failure to meet plan conditions | Options expire or cease under the plan |
Once an employee exercises an option and receives shares, the legal treatment changes. Any subsequent forfeiture involving those issued shares must follow the applicable share-law provisions.
What is forfeiture of shares?
Forfeiture of shares is the compulsory loss of a shareholder’s rights in specific issued shares following a qualifying default. It commonly occurs when a shareholder fails to pay a valid call on partly paid shares. The company’s Articles must authorize the action, and the required procedure must be completed.
Let’s understand this with an example.
Suppose your company issues 500 shares with a face value of ₹10 each. The shareholder pays ₹6 per share, leaving ₹4 payable when the company makes a valid call.
If the shareholder misses the payment, the company may initiate forfeiture under its applicable Articles. The shareholder can lose the rights attached to those shares after the required process is completed.
A call on shares is a demand for payment of an amount due on shares under the applicable terms. The unpaid amount is commonly recorded as calls in arrears.
Forfeiture also differs from a regular share transfer. In a transfer, the existing holder passes ownership to another person. In forfeiture, the company exercises a power available under its governing documents following a qualifying default.
What is the legal basis for forfeiture of shares in India?
The legal authority for forfeiture comes primarily from your company’s registered Articles of Association. Section 5 and Schedule I of the Companies Act, 2013 provide the wider statutory framework.
Schedule I, Table F contains model Articles for companies limited by shares. Regulations 28 to 34 specifically address forfeiture-related procedures and consequences.
The following provisions are particularly relevant.
| Provision | What it covers |
|---|---|
| Regulation 28 | Notice following failure to pay a call |
| Regulation 29 | Payment deadline and forfeiture warning |
| Regulation 30 | Board resolution for forfeiture |
| Regulation 31 | Sale, disposal, and cancellation of forfeiture |
| Regulation 32 | Loss of membership and continuing payment liability |
| Regulation 33 | Declaration of forfeiture and disposal-related provisions |
| Regulation 34 | Application to certain sums payable at fixed times under issue terms |
Your company’s registered Articles remain the first document to check. They establish the applicable powers and may contain requirements that differ from the model wording.
The terms of issue also matter. They help establish when an amount becomes payable and which payment obligations fall within the forfeiture provisions.
For the statutory text, refer to the Companies Act, 2013, particularly Section 5 and Schedule I.
Compliance check
Before proceeding, ask your company secretary to confirm how Table F applies to your registered Articles. A generic online template cannot establish the forfeiture power for your specific company.
When can a company forfeit shares?
A company may consider forfeiture when a shareholder defaults on a qualifying payment obligation. The Articles must authorize forfeiture for that type of default, and the company must follow the applicable procedure.
The most common example involves partly paid shares. However, Regulation 34 of Table F also covers certain sums payable at fixed times under the terms of issue, including amounts relating to nominal value or premium.
The following conditions help determine whether forfeiture can proceed.
- Valid obligation: A properly created call or qualifying fixed payment is due.
- Payment default: The shareholder has failed to pay the required amount.
- Authority under the Articles: The company has the applicable forfeiture power.
- Proper notice: The shareholder receives the notice required by the governing provisions.
- Board approval: The board passes a valid forfeiture resolution after the required period.
- Proper purpose: The directors act bona fide in the company’s interests.
Consider a shareholder who owns 2,000 partly paid shares. The company validly calls ₹3 per share, creating an outstanding obligation of ₹6,000.
If payment remains outstanding, the company may begin the applicable forfeiture procedure. The unpaid ₹6,000 alone does not establish that the shares have already been forfeited.
1. Situations that require additional caution
Some shareholder disputes look like payment defaults but call for a different legal approach. You should identify the exact obligation before applying forfeiture provisions.
- Fully paid-up shares: These ordinarily have no outstanding nominal capital call.
- Unrelated debt: A personal loan owed by the shareholder does not automatically qualify.
- Shareholder disputes: Disagreements over control or management require their own legal resolution.
- Defective payment calls: The validity of the original call must be established before proceeding.
- Incorrect notice: Missing details or improper service can affect the validity of forfeiture.
A legal review at this stage can prevent a dispute from turning into a contested ownership action.
What is the procedure for forfeiture of shares?
The procedure for forfeiture of shares moves from verifying legal authority to establishing default and serving notice. The board considers forfeiture only after the relevant payment period has expired.
The sequence below follows the general Table F approach.
Check Articles → Verify outstanding call → Serve notice → Allow payment period → Pass board resolution → Update records
1. Check the Articles of Association and issue terms
Start with the company’s registered Articles. Locate the provision that permits forfeiture and identify any conditions attached to that power.
Next, examine the original share issue terms. Confirm the payment obligation and the affected share class.
Your company secretary should also review relevant shareholder agreements if they contain restrictions or additional requirements.
2. Calculate the outstanding amount
Before contacting the shareholder, reconcile the payment records. You need a clear statement of how much was called and how much was received.
The calculation may also include interest if the Articles or applicable terms authorize it.
Use the following details to prepare the outstanding-payment statement.
| Particulars | Information to verify |
|---|---|
| Number of shares | Shares affected by the payment default |
| Amount called | Validly called amount per share |
| Amount received | Payments already credited to the shareholder |
| Outstanding balance | Remaining amount due |
| Interest | Applicable rate and legal basis, if any |
| Payment deadline | Date when payment became due |
For example, a shareholder holding 800 shares might owe ₹4 per share. The principal outstanding amount would be ₹3,200.
Any interest must have a valid basis under the governing provisions. The finance team should calculate it separately.
3. Serve the forfeiture notice
Once the company confirms the default, it should serve a notice in accordance with the applicable Articles.
Regulations 28 and 29 of Table F address the notice process. The notice should identify the payment required and warn that failure to comply may lead to forfeiture.
Include the following information in the notice.
- Share details: Identification and number of affected shares.
- Outstanding payment: Principal due and any applicable interest.
- Payment instructions: Where and how the shareholder should pay.
- Final deadline: The date by which payment must be completed.
- Forfeiture warning: A clear statement of the possible consequence of non-payment.
How much notice is required?
Under Regulation 29 of Table F, the specified payment date must be at least 14 days after service of the notice.
Your Articles may require a longer period or contain additional conditions. The company must follow its applicable requirements and preserve evidence of service.
Notice period matters
The 14-day period is measured from service of the forfeiture notice under the Table F model. Keep the service record, stated deadline, and payment history together so the board can establish whether the required period expired.
4. Allow the shareholder to make payment
The shareholder must receive the complete payment period specified in the valid notice.
During that time, the finance team should monitor payments. It should also record any relevant correspondence concerning the outstanding amount.
If the shareholder makes the required payment within the period, the company should close the proposed forfeiture for that satisfied default, subject to the applicable terms.
5. Obtain the board resolution
If the payment remains outstanding after the deadline, the board may consider forfeiture under the applicable Articles.
Regulation 30 of Table F provides for forfeiture by board resolution following failure to comply with the notice.
The board should receive an evidence pack covering the default and the procedural steps completed.
That pack should contain the following records.
- Authority: Applicable provisions from the registered Articles.
- Affected holdings: Shareholder details and number of shares.
- Payment calculations: Amount due and payment history.
- Notice records: Copy of the notice and proof of service.
- Deadline confirmation: Evidence that the payment period expired.
- Proposed decision: Draft forfeiture resolution and related actions.
The company secretary should confirm the appropriate board procedure, including meeting requirements under the company’s Articles and applicable law.
6. Notify the shareholder and update records
After valid board approval, the company should communicate the decision to the affected person.
The legal and finance teams can then update the relevant ownership and accounting records. Any depository or RTA action should follow the procedure applicable to the holding.
Keep the notice, board papers, approval, and subsequent communications available for audit or future review.
What are the legal effects of forfeiture?
Valid forfeiture changes the shareholder’s position in relation to the affected shares. It may also leave an outstanding payment obligation that the company can recover.
Regulations 31 to 33 of Table F address important consequences of forfeiture.
The effects can be grouped as follows.
| Area | Effect of valid forfeiture |
|---|---|
| Membership | The former holder ceases to be a member for the forfeited shares |
| Shareholder rights | Rights attached to those shares cease |
| Previous payments | Amounts already paid may be retained |
| Outstanding dues | Certain amounts payable at forfeiture remain recoverable |
| Subsequent disposal | Shares may be sold or otherwise disposed of under the applicable Articles |
| Reversal | The board may cancel forfeiture before disposal where the governing provisions permit |
1. Does the shareholder remain liable after forfeiture?
Yes, the former shareholder may remain liable for money that was presently payable in respect of the shares at the date of forfeiture.
Regulation 32 of Table F expressly addresses that continuing liability. This liability ceases when the company receives full payment of the relevant amount owed on those shares.
Suppose ₹4,000 was due when forfeiture occurred. The company must assess that outstanding amount under its applicable Articles, including the effect of any later amounts recovered.
The finance team should maintain a clear reconciliation to prevent duplicate recovery.
2. Can the company sell forfeited shares?
Regulation 31 of Table F allows the board to sell or otherwise dispose of forfeited shares on permitted terms.
Any subsequent transaction should be supported by proper approval and documentation. The person acquiring the shares must also be recorded through the applicable registration or depository process.
Regulation 33 addresses declarations concerning forfeiture and protections associated with the purchaser’s title.
The underlying forfeiture and later disposal should each have a complete documentary record.
Can a company cancel a forfeiture?
A company may be able to restore a forfeited holding before the shares have been sold or otherwise disposed of.
Under Regulation 31(2) of Table F, the board may cancel forfeiture before disposal on terms it considers appropriate. The company’s actual Articles determine the applicable power.
Consider a shareholder who approaches the board after forfeiture and offers to settle the overdue amount. The board may consider canceling the forfeiture if the governing provisions allow it.
1. What should the board document before restoration?
The company should record the decision and its conditions before changing ownership records.
The restoration documentation should address the following matters.
- Reason: Why cancellation of forfeiture is being approved.
- Payment terms: Amounts or conditions the shareholder must satisfy.
- Board approval: Evidence of the valid decision.
- Membership records: Restoration of the affected holding.
- Accounting treatment: Any entries that require reversal or adjustment.
- Depository records: Relevant changes for dematerialized holdings.
Cancellation of forfeiture and reissue of forfeited shares serve different purposes. The former restores the original holding, while the latter involves a subsequent disposal.
How is forfeiture of shares accounted for?
Accounting for forfeited shares depends on the called-up amount and the payments received. Securities premium, if applicable, also affects the entries.
The conventional accounting treatment reverses the called-up share capital associated with the forfeited shares. It then accounts for the unpaid amount and the capital already received from the shareholder.
The entries below follow the standard educational treatment used in ICAI materials. A chartered accountant (CA) should review the treatment for the company’s applicable accounting framework.
1. Journal entry for forfeiture of shares
When shares are forfeited for non-payment of a call, the Share Capital Account is debited for the called-up amount.
The unpaid call is credited to the Calls in Arrears Account if the receivable has already been recorded. The amount received toward capital is credited to the Shares Forfeited Account.
The general journal entry is shown below.
| Particulars | Debit | Credit |
|---|---|---|
| Share Capital A/c Dr. | Called-up capital | |
| To Calls in Arrears A/c | Unpaid amount | |
| To Shares Forfeited A/c | Amount received toward capital |
The treatment changes when securities premium is involved.
If an unpaid premium was previously credited to the Securities Premium Account, the company may need to reverse the corresponding unpaid amount. Premium already received requires separate consideration.
Your accountant should examine the actual payment schedule before posting the entry.
2. Journal entry for reissue of forfeited shares
When forfeited shares are reissued, the company records the amount received from the new holder.
For a conventional fully paid reissue below face value, the difference is adjusted against the forfeiture balance available for those shares.
The general entry is as follows.
| Particulars | Debit | Credit |
|---|---|---|
| Bank A/c Dr. | Amount received | |
| Shares Forfeited A/c Dr. | Discount adjusted | |
| To Share Capital A/c | Face value of reissued shares |
In conventional forfeiture accounting, the discount adjusted against the Shares Forfeited Account should stay within the forfeited amount attributable to the reissued shares.
The company’s legal adviser and accountant should confirm the proposed reissue terms before approval.
3. Transfer of surplus to Capital Reserve
Once forfeited shares are reissued, the remaining forfeiture-related balance attributable to those shares is conventionally transferred to Capital Reserve.
If only a portion of the forfeited holding is reissued, the transfer must reflect that portion. The balance associated with shares awaiting disposal remains separately identifiable.
The general entry is shown below.
| Particulars | Debit | Credit |
|---|---|---|
| Shares Forfeited A/c Dr. | Relevant surplus | |
| To Capital Reserve A/c | Relevant surplus |
Accounting check
When only some forfeited shares are reissued, calculate the forfeited amount attributable to those particular shares before transferring the surplus. The financial statement presentation should be reviewed under the company’s applicable accounting standards.
Worked example of forfeiture and reissue of shares
Let’s look at an example to understand how the calculations and journal entries work together.
A company has issued 1,000 equity shares at a face value of ₹10 each. The full ₹10 has been validly called, but the shareholder has paid only ₹6 per share.
The shareholder defaults on the remaining ₹4. Following a valid forfeiture process, the company forfeits all 1,000 shares.
Later, the company reissues 600 shares as fully paid at ₹8 each.
The example assumes no securities premium or interest. Transaction costs and tax adjustments are excluded.
1. Calculate the forfeiture amounts
Start with the amount called and the amount received. The difference represents the unpaid call.
The calculations are as follows.
| Particulars | Calculation | Amount |
|---|---|---|
| Total called-up capital | 1,000 × ₹10 | ₹10,000 |
| Amount received | 1,000 × ₹6 | ₹6,000 |
| Unpaid call | 1,000 × ₹4 | ₹4,000 |
| Shares subsequently reissued | 600 shares | |
| Amount received on reissue | 600 × ₹8 | ₹4,800 |
| Face value of reissued shares | 600 × ₹10 | ₹6,000 |
| Reissue discount | 600 × ₹2 | ₹1,200 |
2. Record the forfeiture entry
The company reverses ₹10,000 in called-up capital. It credits ₹4,000 to Calls in Arrears and ₹6,000 to Shares Forfeited.
The resulting entry is shown below.
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Share Capital A/c Dr. | 10,000 | |
| To Calls in Arrears A/c | 4,000 | |
| To Shares Forfeited A/c | 6,000 | |
| Total | 10,000 | 10,000 |
The Shares Forfeited Account now has a credit balance of ₹6,000.
3. Record the reissue entry
The company reissues 600 shares at ₹8 each and receives ₹4,800.
Since the shares are treated as fully paid at ₹10 each, the company credits ₹6,000 to Share Capital. The ₹1,200 difference is adjusted against the Shares Forfeited Account.
The entry is as follows.
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Bank A/c Dr. | 4,800 | |
| Shares Forfeited A/c Dr. | 1,200 | |
| To Share Capital A/c | 6,000 | |
| Total | 6,000 | 6,000 |
The discount works out to ₹2 per share. The original forfeited amount attributable to each share is ₹6.
4. Calculate the amount transferred to Capital Reserve
Only 600 of the 1,000 shares have been reissued. The company must therefore calculate the forfeiture surplus attributable to those 600 shares.
The calculation is straightforward.
Forfeited amount attributable to reissued shares
600 × ₹6 = ₹3,600
Less reissue discount
600 × ₹2 = ₹1,200
Capital Reserve
₹3,600 − ₹1,200 = ₹2,400
The resulting journal entry is shown below.
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Shares Forfeited A/c Dr. | 2,400 | |
| To Capital Reserve A/c | 2,400 | |
| Total | 2,400 | 2,400 |
The remaining ₹2,400 in the Shares Forfeited Account relates to the 400 shares still awaiting disposal.
5. Update the cap table
The company’s ownership records should show the original forfeiture and subsequent reissue as separate events.
The affected holding can be summarized as follows.
| Record | Number of shares | Status |
|---|---|---|
| Original shareholder | 1,000 | Forfeited |
| New shareholder | 600 | Reissued and fully paid |
| Remaining forfeited shares | 400 | Awaiting disposal |
The completed accounting entries balance, and the calculations reconcile to the original ₹6,000 forfeiture amount.
The CA should still approve the journal entries and financial statement presentation before they are used in the company’s accounts.
How can a company reissue forfeited shares?
Once forfeiture is validly completed, the company may sell or otherwise dispose of the shares under its applicable Articles.
Regulation 31 of Table F gives the board authority to determine permitted disposal terms where that model provision applies.
The company should approve the consideration and properly document the transaction. Its secretarial team must then complete the relevant registration process.
1. What should be checked before reissue?
The reissue process requires both corporate and accounting checks. The company should establish how the proposed transaction affects ownership and the relevant capital accounts.
The key checks are listed below.
- Board authority: Approval under the applicable Articles.
- Reissue price: Consideration and treatment of any discount.
- Paid-up status: Amount treated as paid on the reissued shares.
- Recipient details: Identity and eligibility of the acquiring person.
- Accounting entries: Share capital and forfeiture balance adjustments.
- Ownership records: Register of members and cap-table changes.
- Supporting documents: Approval and transfer or disposal records.
2. Is reissue of forfeited shares a fresh allotment?
Conventional company accounting distinguishes reissue of forfeited shares from fresh allotment.
A fresh allotment involves issuing shares through the applicable allotment process. Reissue concerns shares that were previously issued and subsequently forfeited.
The exact statutory treatment depends on the transaction and the company’s governing documents.
Obtain legal advice on the relevant share-capital provisions before deciding which approvals and filings apply.
What must listed companies disclose?
Listed companies have additional disclosure responsibilities when securities are forfeited or reissued.
Regulation 30 and Schedule III of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 address relevant securities-related disclosure events.
This article refers to the consolidated SEBI LODR Regulations dated July 14, 2026.
A listed company should assess the event classification and determine the applicable filing deadline before the board action.
1. How should the disclosure deadline be determined?
Regulation 30(6) contains different disclosure timelines depending on the event and how it arises.
Board-meeting outcomes may have shorter reporting timelines. Certain other events follow different requirements, so the company should confirm which provision governs its proposed forfeiture or reissue.
The compliance team should check these matters.
- Event classification: Applicable item in Schedule III.
- Reporting trigger: When the disclosure obligation arises.
- Deadline: Current regulatory timeline for the event.
- Disclosure contents: Information required by SEBI and the exchanges.
- Depository coordination: Relevant RTA and corporate-action procedures.
- Follow-up filings: Subsequent reporting arising from completion or changes.
For current requirements, refer to the SEBI LODR Regulations updated July 14, 2026.
Listed-company compliance check
Have your company secretary or securities counsel confirm the specific disclosure timeline and applicable exchange requirements. A single deadline should not be assumed for every forfeiture or reissue event.
What records should be updated after forfeiture or reissue?
After approval, the company needs to bring its shareholder and financial records into line with the completed corporate action.
A well-maintained cap table helps your team see the ownership effect. The statutory register and supporting corporate records remain essential.
Use the following checklist after valid forfeiture or reissue.
- Board minutes: Final resolution and supporting documents
- Notice records: Copy of the notice and evidence of service
- Register of members: Updated shareholder information
- Cap table: Separate entries for forfeiture and subsequent reissue
- Accounting ledger: Correct share capital and forfeiture adjustments
- Certificates or demat records: Relevant updates for the holding type
- Capital disclosures: Correct treatment in applicable financial statements
- RTA records: Coordination with the registrar and transfer agent, where required
- Exchange filings: Listed-company disclosures, where applicable
- Transaction documents: Supporting declarations and disposal approvals
- Record reconciliation: Agreement between finance and secretarial records
A single transaction history also makes it easier to identify how many forfeited shares have been reissued and how many remain awaiting disposal.
Common mistakes in forfeiture of shares
A company may have a valid unpaid call and still face problems if the forfeiture procedure is handled incorrectly.
Errors commonly arise from defective notices or incorrect payment calculations. Record changes made before approval can also create ownership confusion.
The following table summarizes the risks and practical controls.
| Common mistake | Potential consequence | Recommended control |
|---|---|---|
| Articles lack the assumed power | Challenge to legal authority | Verify the registered Articles |
| Call was improperly made | Defective basis for forfeiture | Review the call approval and terms |
| Notice omits required information | Procedural challenge | Use a legally reviewed notice |
| Incorrect notice period | Premature or defective action | Verify the period from service |
| Board acts before the deadline | Invalid or disputed forfeiture | Confirm expiry before approval |
| Improper purpose | Challenge to the board’s decision | Record the legitimate business reason |
| Share forfeiture confused with ESOP lapse | Incorrect ownership treatment | Classify the event correctly |
| Cap table updated before approval | Inaccurate ownership records | Record changes after the valid action |
| Unpaid premium ignored | Incorrect accounting | Reconcile premium separately |
| Partial reissue incorrectly calculated | Incorrect Capital Reserve | Allocate the forfeiture balance proportionately |
| SEBI disclosure missed | Regulatory exposure | Confirm the event-specific reporting obligation |
| Demat holding treated like a physical certificate | Processing errors | Follow applicable depository procedures |
A practical way to prevent these errors is to have the company secretary and finance team review the same supporting documents before the board makes its decision.
How does forfeiture of ESOP options work?
ESOP option forfeiture concerns rights granted to employees under an approved stock option plan.
The employee holds an option to acquire shares, subject to the plan conditions. The company’s ESOP plan and grant letter determine what happens when a qualifying event occurs.
Employee separation is one possible trigger. Vesting conditions and exercise deadlines can also affect an option’s status.
1. How do forfeited and lapsed ESOP options differ?
These terms depend on the approved plan, so check the exact definitions used by your organization.
The following comparison describes common practical distinctions.
| Option status | Typical meaning | Treatment |
|---|---|---|
| Forfeited | Option lost following a plan-defined event | Handled under forfeiture provisions of the ESOP plan |
| Lapsed | Option expires or ceases under plan conditions | Removed from outstanding options as the plan provides |
| Exercised | Option used to acquire shares | Shares are issued and recorded through the applicable process |
Some plans allow qualifying options to return to the available ESOP pool. The applicable plan rules and approvals determine which options can be reused.
2. How can Hissa help track ESOP option status?
Hissa’s ESOP management software provides visibility into the option lifecycle, including granted and vested options. It also tracks exercised and forfeited options.
Your HR and finance teams can use these records to monitor option movements and reconcile the plan’s outstanding grants.
Hissa also provides ESOP financial reporting capabilities that support reporting under Indian Accounting Standard 102 (Ind AS 102).
The exact classification of forfeited and lapsed options, including their treatment in the available pool, must follow the approved ESOP plan.
Practical checklist before the board considers forfeiture
Before approving forfeiture, the board should have a clear record of the shareholder’s default and the company’s legal authority.
A short pre-approval review can help the team catch calculation or notice errors early.
Work through these checks before placing the proposal before the board.
- Articles: Confirm the applicable forfeiture power.
- Issue terms: Identify the original payment obligation.
- Call records: Verify that the call was properly made.
- Payment reconciliation: Confirm the amount outstanding.
- Interest: Check the applicable basis and calculation.
- Notice: Obtain legal or secretarial approval of its contents.
- Service: Preserve evidence of valid notice delivery.
- Cure period: Confirm the complete period has expired.
- Board papers: Prepare the resolution and supporting evidence.
- Listed-company obligations: Review SEBI and exchange requirements.
- Accounting: Obtain CA review of proposed entries.
- Ownership records: Prepare updates following valid approval.
- Audit trail: Preserve documents supporting the transaction.
Completing these checks helps the board make an informed decision and gives the finance team a reliable starting point for the accounting entries.
Managing forfeiture of shares and equity records with Hissa
Forfeiture of shares requires more than a board decision. The payment history, legal approvals, and accounting entries must support the same transaction. Your ownership records should reflect the outcome accurately.
Before closing the process, make sure your team has completed these essential steps.
- Verify legal compliance: Confirm that the forfeiture follows the company’s Articles of Association and applicable provisions of the Companies Act, 2013.
- Complete accounting entries: Record the forfeiture and any subsequent reissue, including relevant adjustments to share capital and Capital Reserve.
- Update ownership records: Reflect the forfeiture and any reissue in the register of members and cap table after valid corporate approval.
- Maintain an audit trail: Preserve notices, board resolutions, payment records, and supporting documents for future reference.
Once the legal and secretarial formalities are complete, Hissa’s cap table management platform can help your team maintain organized ownership records and track equity transactions.
Want to keep your equity records organized and up to date? Book a demo with Hissa to see how you can manage your cap table and track ownership changes in one place.
