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Can shares be forfeited to relieve a shareholder from liability in connection with a company?
Published on: 18 August 2017
It may be possible for Forfeiture to be used to relieve a shareholder from liability to pay any outstanding balance of the Nominal value (and of any premium at which the relevant Shares have been issued). However, this would require co-operation between the company's directors and the relevant member and would be subject to a number of caveats.
Notwithstanding forfeiture, the former holder of the forfeited shares will typically remain liable to the company under the provisions of the company's articles for all sums payable by that person to the company in respect of the relevant shares. The directors may decide to enforce payment or to waive it in whole or in part.
In deciding to waive payment, the directors would be required to comply with their statutory
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Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Shares definition
What does Shares mean?
The CA 2006 merely provides that a share is a share in the company's share capital. A company's share capital comprises the number of shares issued by it to investors either on or after incorporation. Those investors then become the shareholders in the company. A shareholder’s shares are their personal property. By contrast, the assets of a company are owned by the company itself. Owning shares does not entitle a shareholder to any property rights in the company's assets.
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