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While issuing shares, Companies collect the share amount from the shareholders. They had to pay for the amount. However, the shareholders can make part payments (instalments) subject to some conditions. In this regard, the company directors issue a call notice to the shareholders per the entity’s articles of association, requiring them to pay the sum agreed upon by the shareholders. This is known as a call on shares.[1]  Both Forfeiture and surrender of shares have roots in this concept.


When a shareholder does not pay the agreed-upon payment for shares, whether nominal or premium, as called for by the company’s directors, forfeiture occurs and the shareholder loses ownership of the shares allocated to them. These shares can be re-issued to another person.[2] His enrollment as a shareholder ends. The company reserves the right to confiscate any sums he paid before losing his share allocation.[3]


There were no provisions related to forfeiture in the company act 1956. But SEBI (Disclosure And Investor Protection) guidelines Under these guidelines, if unpaid capital on shares is to be received by calls, then it should be called within 12 months of the allotment of share and in case of non-payment, money that was paid earlier will be forfeited.[4]


Table F contains provisions (Regulation 28-34) that specifically deal with the forfeiture of shares. The company can forfeit the shares of the defaulting shareholder only when the Articles of Association authorize it to do so. In case, there are no provisions in this regard in the AoA of the company, then the provisions of Table A will apply. Regulation 28 provides that in case of nonpayment of any call on the date specified, the board may give notice requiring him to pay the amount of the call along with the interest which may have accrued. Regulation 29 provides that notice aforesaid must contain the statement fact that in case of non-payment on the specified day or before, the shares in respect of which the call was made shall be liable to be forfeited. It should also contain a further date, on or before which the specified payment is to be made. The date so specified in the notice should not be less than fourteen days from the date of service of notice. Regulation 30 provides that resolution be passed for forfeiting the shares in case the directions of the notice are not complied with. Regulation 31 provides that it is upon the Board to decide concerning terms of the sale of shares and the cancellation of forfeiture of the shares as it thinks fit. Regulation 32 states that the defaulting shareholder is liable to pay all the money which is due to him at the date of forfeiture to the company. His liability ceases in case he pays all his due money to the company. He ceases to be the member regarding forfeited shares. Regulation 33 states that a duly verified declaration serves as a shred of conclusive evidence against all persons claiming to be entitled to the share only when the declaration in writing states that the declarant is the manager, the director, or secretary of the company and shares had been duly forfeited on the particular date. The company can transfer the forfeited shares to the other person. Regulation 34 provides that the provisions of these regulations will apply in case of non-payment of the sum so agreed on account of nominal value or by way of premium by a call duly made and notified.[5]


The forfeited shares are the property of the company. Regulation 31 states that the board has the power to sell the shares in such a manner as it deems fit. As per clause 23 (a) of the Listing Agreement, at first instance all the shares (including forfeited shares) are offered to the existing shareholders unless otherwise agreed upon. The consent of existing shareholders, as well as the stock exchanges, is necessary for the board to issue the forfeited shares to a third person other than the existing shareholders.[6] Re-issuance of fortified shares is the sale and it is not necessary to file a return on those shares.[7]


When the shareholder voluntarily surrenders his shares to the company in case of non-payment of call money is called a surrender of shares. There is less harm to the reputation of the shareholders as compared to the process forfeiture of shares. The outcome of both concepts is the same i.e. cancellation of the allotted shares. However, the Companies Act of 2013 does not include a process for share surrender since, if it were, the company would be buying its shares. But this concept can be recognized by the articles of association of the company. The difference between the surrender of shares and forfeiture is that the former is initiated by the shareholder himself and the latter by the company.[8]


The surrender is valid in the case of partially paid-up shares where forfeiture is required and the firm accepts the surrender to avoid the hassle of the process of forfeiture. When it comes to fully paid-up shares, new shares with the same nominal value are exchanged for the relinquished shares. It can be done without the leave of the court. The member who validly surrendered the shares may be held accountable as a List B contributory if the company collapses within a year of the surrender. Shares that have been validly surrendered may be reissued in the same manner as shares that have been forfeited.[9]


Under section 183, a shareholder can surrender his shares to the company by way of a gift. He cannot do the same just to reduce the liability of unpaid capital. [10]However, the share capital can be reduced in any way subject to confirmation of the court through a special resolution if authorized by the article of the company under section 131 of the act.[11]


Both concepts revolve around unpaid capital and the reduction of capital in a company. In the case of forfeiture of shares, the company forcefully takes back the shares whereas, in the case of surrender, the shareholder voluntarily returns the shares. In both cases, the outcome is the same. In both cases, articles of association play a major role. In the case of forfeiture of shares, the Companies Act 1956 does not have any provisions, but the SEBI guidelines shape the process of forfeiture. There are no provisions concerning the surrender of shares in the Companies Act 2013. Surrender of shares is opted to avoid the formalities of forfeiture after the approval of the court.

Author(s) Name: Shobita (Guru Nanak Dev University, Amritsar)


[1] ‘Call On Shares Definition’(MANAGEMENT STUDY HQ)<> accessed 8 June 2023

[2] Pathan Apser Hussen, ‘Forfeiture of Shares’ (Manupatra, April 22, 2003)<> accessed 8 June 2023

[3] Ronith Pemmaiah, ‘Forfeiture and Surrender of Shares’(2021) Black n’ White <>accessed 8june 2023

[4] SEBI (Disclosure And Investor Protection) Guidelines 2000, cl 8

[5] The Companies Act 2013, table f R 28-34

[6] Pathan Apser Hussen, ‘Forfeiture of Shares’ (Manupatra, April 22, 2003)<> accessed 8 June 2023

[7] Sri Gopal Jalan & Company v Calcutta Stock Exchange association Ltd (1964) AIR 250

[8] Ronith Pemmaiah, ‘Forfeiture and Surrender of Shares’(2021) Black n’ White <>accessed 8june 2023

[9] Falah, ‘CALL ON SHARES, LIEN ON SHARES, SURRENDER OF SHARES AND FORFEITURE OF SHARES’ (WordPress,  July 20, 2020) <>  accessed 10 June 2023

[10] Companies and Allied Matters Act  2020, s183 cl 6

[11] Companies and Allied Matters Act  2020, s131