1. A forfeiture of any share must be done on the authority of the Board of Directors or, of a Committee of the Board if authorised by articles of association for the purpose, by its resolution. The resolution should provide for a notice to be given to the shareholder concerned before the forfeiture is actually effected in pursuance of the resolution, requiring payment of so much of the call as is unpaid, together with any interest which may have accrued.
2. The notice threatening forfeiture in pursuance of the Board resolution must be given in accordance with the provisions of the articles. The notice aforesaid shall
— name a further day (not being earlier than the expiry of fourteen days from the date of service of the notice) on or before which the payment required by the notice is to be made; and
— state that, in the event of non-payment on or before the day so named, the shares in respect of which the call was made will be liable to be forfeited.
3. The notice must
— specify clearly the amount payable on account of unpaid call money as well as interest accrued, if any, and other expenses.
— mention the day on or before which the amount specified ought to be paid, not be earlier than 14 days from the date of service of the notice
— contain an unambiguous statement to the effect that in the event of failure to pay the specified amount latest on the appointed day, the shares in respect of which the amount remains unpaid would be liable to be forfeited.
4. The notice threatening forfeiture as contemplated in regulation 29 of Table A must be served in accordance with the provisions of section 53 of the Companies Act.
5. If the call money is not paid in response to such notice threatening forfeiture, the company may, at any time thereafter, before the payment required by the notice has been made, forfeit the shares by a resolution of the Board to that effect.
6. It is common practice to publish a notice of forfeiture in newspapers so that the members of the public are made aware of the forfeiture and cautioned not to deal in the forfeited shares.
7. A further notice after the shares are forfeited is not necessary. However, it is advisable and a common practice to give a notice of the shares having been forfeited to the concerned shareholders by registered post. For model notice, see below.
8. Regulation 34 of Table A provides for a verified declaration in writing to be issued under the signature of a director, manager or secretary of the company that a share in the company has been duly forfeited on a date stated in the declaration. The declaration so made shall be conclusive evidence of the facts stated therein as against all persons claiming to be entitled to the shares forfeited. The accidental non-receipt of notice of forfeiture by the defaulter is not a ground for relief against forfeiture regularly effected.
9. The fact of the forfeiture will be entered in the Register of Members and the name of the concerned shareholder as a member of the company will be deleted from the register.
10. Notify the Stock Exchange at which the securities of the Company are listed about such forfeiture of shares.
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