Forfeited Share
A forfeited share is a share in a publicly-traded company that the owner loses (or forfeits) by neglecting to live up to any number of purchase requirements. For example, a forfeiture may occur if a shareholder fails to pay an owed allotment (call money), or if he sells or transfers his shares during a restricted period.When a share is forfeited, the shareholder no longer owes any remaining balance and surrenders any potential capital gain on the shares, which automatically revert back to the ownership of the issuing company.
Definition: Forfeited shares refer to shares in a listed company that are lost (or forfeited) by shareholders due to failure to meet any purchase requirements. For example, if a shareholder fails to pay the allotment amount due (litigation amount), or sells or transfers shares within the restricted period, the shares will be forfeited. When a share is forfeited, the shareholder no longer owes any balance and forfeits any potential capital gains from the stock, and the shares automatically revert to the issuing company's ownership.
Origin: The concept of forfeited shares originates from corporate law and securities law regulations, aimed at ensuring that companies can effectively manage their capital structure and protect the company's interests when shareholders fail to meet their financial obligations. With the development of capital markets, this concept has gradually been widely accepted and applied.
Categories and Characteristics: Forfeited shares are mainly divided into two categories: those forfeited due to non-payment of allotment amounts and those forfeited due to violation of holding restrictions. The former usually occurs during new share issuance or additional issuance when shareholders fail to pay the subscription amount on time; the latter occurs when shareholders sell or transfer shares within the company's restricted holding period. Characteristics of forfeited shares include: loss of ownership by the shareholder, re-acquisition of shares by the company, and the shareholder no longer owing any balance.
Specific Cases: Case 1: A company conducts a new share allotment, and shareholder A subscribes for 1,000 shares but fails to pay the subscription amount within the stipulated time. According to the company's articles of association, A's 1,000 shares are considered forfeited shares, and the company re-acquires ownership of these 1,000 shares. Case 2: Shareholder B sells part of their shares within the restricted holding period, violating company regulations. According to relevant regulations, these shares are considered forfeited shares, and the company re-acquires ownership of these shares.
Common Questions: 1. Can forfeited shares be re-subscribed? Generally, forfeited shares will re-enter the company's capital structure, and whether they are re-issued is decided by the company. 2. Can shareholders recover forfeited shares? Once shares are forfeited, shareholders usually cannot recover these shares unless the company has special provisions.
