What happens if a person refuses to pay for shares?
A member is liable to pay up the nominal value of each of his shares and the amount owing to the company is a debt which can be 'called up'.
If a member refuses to pay all or any call on a share, the company may use forfeiture proceedings if permitted by its articles. A typical procedure is set out in paragraphs 18-22 of Table A of The Companies (Tables A to F) Regulations 1985 (if alternative provisions have not been adopted). As these proceedings are of a penal nature the regulations must be followed exactly, otherwise the court may declare forfeiture proceedings void.
A forfeited share may be sold, re-allotted or otherwise disposed of at the discretion of the directors. Companies House need not be notified of the forfeiture or re-allotment except in the list of members on the company's next annual return.
If a member cannot pay a call on shares, and if the member and the company agree, the shares may be surrendered to the company. This has the same effect as forfeiture but avoids the formal procedure. The company may only accept surrender if it could have used its power of forfeiture.
A private company may hold forfeited shares indefinitely pending re-allotment. A public company must cancel the forfeited shares if they are not otherwise disposed of after three years. If the cancellation were to reduce a public company's allotted capital below the statutory minimum, it would have to re-register as a private company.
A company cannot use forfeited shares for the purposes of voting.
BACK TO COMPANY REGISTRATION GUIDANCE
Source:
http://www.companieshouse.gov.uk/about/gbhtml/gba6.shtml#one
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