What are the grounds on which the shares can be forfeited?

The grounds on which the shares can be forfeited are as follows:

1. If permitted by the Articles, the shares can be forfeited only for non-payment of calls and installments and not for non-payment of other debts. In any provision is contained in the Articles to forfeit shares for non-payment of other debts than it will be invalid as an authorized reduction of capital.
2. The company may by its Articles provide the ground for forfeiture other than non-payment of calls, subject to the qualification that such Articles are not against the general law of the land and the companies Act and the public policy. The forfeiture done should not effect in the reduction of the capital of the company.
3. The power to forfeit shares must be in a goods faith and for the benefit of the company. a power to forfeit share on payment to a person of the full market value of his shares and if in case he commences and/or threatens an action against the company or directors, it will be invalid because it infringes shareholder’s legal right.
4. The Articles of the company must impose an obligation against the company that they should dispose of such type of shares, which amounts to reduction of the share capital.