WAEC SSCE - Financial Accounting - 1999 (Objective)

Question 1 Report

When a shareholder fails to pay the calls requested from him, this situation leads to

forfeiture of shares

bonus shares

over-subscription

right issues

Answer Details

When a shareholder fails to pay the calls requested from him, this situation leads to the forfeiture of shares. A call is a request for payment made by a company to its shareholders, asking them to pay the remaining amount due on their shares. When a shareholder fails to pay the call, the company has the right to forfeit or cancel the shares held by the shareholder. Forfeiture of shares is a serious consequence for the shareholder, as they lose their investment in the company and all rights associated with the shares. The company can then sell the forfeited shares to recover the unpaid amount, but any excess amount obtained from the sale will be paid to the shareholder. The forfeiture of shares is a legal process that requires the company to follow the procedures specified in the articles of association and the Companies Act. These procedures may include giving notice to the shareholder, holding a board meeting to declare the forfeiture, and canceling the shares in the company's register of members. In summary, the failure to pay calls requested by a company can result in the forfeiture of shares, which means the shareholder loses their investment in the company and all rights associated with the shares.






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