Question
Download Solution PDFX Ltd. forfeited 40 shares of Rs. 10 each and on which Rs. 4 per share were paid. If the forfeited shares reissued as Rs. 8 per share paid up, what is the minimum price the company must charge?
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFForfeited share:
- A forfeited share is an equity share investment that is canceled by the issuing company.
- A share is forfeited when the shareholder fails to pay the subscription money called upon by the issuing company.
- Unpaid shares become the property of the company and the company can forfeit and reissue these shares to any other person at par, premium, or even at a discount.
- A company can re-issue these shares at any price but the total amount received on these shares should not be less than the amount in arrears on these shares.
- Here, the total amount refers to the amount received from the original allottee and the second purchaser.
- In simple words, considering the above example, the company is reissuing shares at Rs.8, the company has already received Rs.4 from the previous transaction, thus, the outstanding amount happens to be Rs.4.
- Now, according to the rule, the company cannot offer a discount more than the forfeited amount on the share.
- The amount of discount must not exceed the amount credited to share forfeited amount, i.e. Rs.4.
- Thus, the maximum discount that can be given is Rs.4 on a share worth Rs.8.
- The company must charge a minimum price of Rs.4.
Last updated on Jun 11, 2025
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