Shares are typically forfeited when a shareholder fails to meet their obligations or defaults on certain terms specified in the Articles of Association or Shareholders' Agreement. The most common reasons for the forfeiture of shares include:

Non-payment of Calls:

• If a shareholder fails to pay the calls (amounts due on shares) within the specified time frame, the company may choose to forfeit the shares. The forfeiture is a punitive action, and the forfeited shares become the property of the company.

Breach of Shareholders' Agreement or Articles of Association:

• If a shareholder violates any terms or conditions outlined in the Shareholders' Agreement or the Articles of Association, the company may have the right to forfeit the shares as a consequence of the breach.

Failure to Provide Information:

• Some agreements may require shareholders to provide certain information or fulfill certain obligations. Failure to do so within the stipulated time frame could result in the forfeiture of shares.

Insolvency or Bankruptcy:

• In cases where a shareholder becomes insolvent or goes bankrupt, the company may choose to forfeit the shares as a protective measure or in accordance with legal provisions.

Share Buyback Agreement:

• In some cases, a company may have a share buyback agreement that allows it to buy back shares from shareholders who meet certain criteria. Failure to comply with the terms of the agreement may lead to share forfeiture.

The process of share forfeiture typically involves the following steps:

Board Resolution:

• The board of directors of the company may pass a resolution authorizing the forfeiture of shares.

Notice to Shareholder:

• The shareholder is usually given notice of the intention to forfeit the shares, providing them with an opportunity to rectify the default.

Resolution at General Meeting:

• The forfeiture may need to be approved by the shareholders at a general meeting.

Cancellation of Shares:

• Once the shares are forfeited, they are canceled, and the shareholder loses all rights associated with those shares.

Reissue or Sale:

• The company may choose to reissue or sell the forfeited shares to new shareholders.

It's important to note that the specific procedures for share forfeiture can vary based on the company's Articles of Association, applicable laws, and regulatory requirements in the jurisdiction where the company is incorporated. Shareholders should be aware of the terms and conditions governing share ownership to avoid forfeiture.