What is meant by Surrender of Shares? Distinguish between Forfeiture of Shares and Surrender of Shares.

Surrender is a short cut to forfeiture. Surrender of shares means voluntary return of shares by a member to the company. It is a short cut to the long procedure of forfeiture of shares. Shares, which are liable to be forfeited on account of default in the payment of calls, may be surrendered by the holder if he so desires. Such voluntary surrender of shares can be accepted by the company provided it is authorized by the Articles of the company.

The formalities with regard to forfeiture are then unnecessary and the shares are deemed to have been forfeited and can-celled without the detailed procedure otherwise required to the purpose. The Directors may accept a surrender of shares only

  • Under the circumstances which would justify forfeiture of shares, i.e., non-payment of sum due in respect of shares which are not fully paid or
  • When the share, certificate gets torn or mutilated and exchanged for the new one.

Distinction between Forfeiture of Shares and Surrender of Shares

Forfeiture of Shares

Nature of Act: Forfeiture is not a voluntary act. It is in the nature of a penalty imposed by the company on a defaulting share.

Provisions of the Companies Act and Table F: Forfeiture is authorized by Table F. But the forfeiture is valid only if  the procedure laid down in the Articles is followed.

Validity: Forfeiture is valid only for non-payment of calls money.

Surrender of Shares

Nature of Act: Surrender is a voluntary act on the part of the shareholder.

Provisions of the Companies Act and Table F: The power to accept surrender of shares is not given in the Companies Act, or conferred by Table F.

Validity: Surrender is valid under two circumstances: (a) When the call money has not been paid. When the share cerfiticate gets torn or

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