Q&As

What happens to shares that are forfeited?

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Produced in partnership with Julian Henwood of Gowling WLG
Last updated on 24/08/2017

The following Corporate Q&A produced in partnership with Julian Henwood of Gowling WLG provides comprehensive and up to date legal information covering:

  • What happens to shares that are forfeited?

What happens to shares that are forfeited?

The process for dealing with forfeited shares will typically be set out in the company's articles of association, as this is not provided for in the Companies Act 2006 (CA 2006) or at common law. See eg the Model Articles for a public company (PLC Model Articles), regulations 60(2) and 61.

A share that has been forfeited is deemed to be the property of the company and may be sold, re-allotted or otherwise disposed of as the directors think fit.

At any time before a forfeited share is disposed of by the company, the directors may decide to cancel the forfeiture if all calls and applicable interest due in respect of the relevant share are paid, on such terms as they think fit (PLC Model Articles, regulation

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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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