Question

SQ Ltd. forfeited 300 shares of ₹ 10 each. The amount forfeited was ₹ 2,700. What will be the maximum discount per share at which these shares can be reissued?

• A. ₹ 9
• B. ₹ 1
• C. ₹ 3
• D. ₹ 2

Hint:

Maximum discount on reissue = Forfeited amount ÷ Number of shares. Never allow discount exceeding the amount forfeited.

Answer 1

The Correct Option is A

When shares are forfeited, the amount received from the defaulting shareholder is retained by the company.
This forfeited amount can be used to allow a discount while reissuing the shares, but only up to the amount originally received.
Given:
- Number of shares forfeited = 300
- Face value per share = ₹ 10
- Total forfeited amount = ₹ 2,700
To calculate the maximum discount per share, we divide the total forfeited amount by the number of shares:
\[ \text{Maximum discount per share} = \frac{2700}{300} = ₹ 9 \]
Hence, the company can reissue these shares at a price as low as ₹ 1 per share (₹ 10 - ₹ 9 discount).
This complies with the Companies Act which states that the discount allowed on reissue cannot exceed the forfeited amount.