Q.Distinguish between irregular allotment of shares and illegal allotment of shares.

The minimum interval between two calls (instalments) on shares is one month — the correct option is (A).

When a company collects the face value of shares in instalments (application, allotment and calls), the Companies Act and the standard table of articles require that there be a reasonable gap between two calls so that shareholders get time to arrange funds. The rule fixes a minimum gap of one month between two consecutive calls.

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A shareholder voluntarily returning his share certificates and giving up his shares is called surrender of shares.

Surrender of shares means the voluntary handing back of shares (along with the share certificates) by a shareholder to the company. The shareholder gives up all his rights and interest in those shares. It is generally resorted to when calls cannot be paid, or to save the company the lengthy process of forfeiture, or on a re-organisation/exchange of shares. On surrender, the shares go back to the company and can be re-issued. It diffe …

An illegal allotment is void from the very beginning.

Allotment of shares must satisfy statutory conditions. Where a condition that goes to the root of the power to allot is broken — for example, allotment made without filing the prospectus/statement in lieu, or before the minimum subscription is received in a proper public issue — the allotment is illegal and void ab initio, i.e., it has no legal effect from the start and cannot be ratified. This is distinct from an irregular allotment, which breaks a pro …

Surrender of shares is not part of the share-application and allotment procedure.

The procedure for share application and allotment moves through steps such as opening a separate bank account to collect application money, receiving the applications with money, and classifying/scrutinising them (valid, invalid, over-subscribed, etc.) before allotment is decided. Surrender of shares is different: it is a voluntary giving-up of already-allotted shares by a member back to the …

Forfeiture is the company cancelling a member's shares for non-payment of calls, forfeiting the money already paid.

When a shareholder does not pay an allotment or call amount by the due date, the company (if its articles allow) may forfeit the shares after giving the defaulting member a proper notice demanding payment with interest and a final date. On forfeiture, the member ceases to be a shareholder for those shares, his name is removed from the register of members, and the amount he had already paid is forfeited to the company (it is not refunded). The forfeited shares may later be re-issued by the company. Thus share f …