What is the forfeiture of shares? Well, it is defined as an event wherein shares of stock or securities are actually lost or forfeited. Common examples are stock shares being sold at a sharply reduced price. It could also be due to stock defaults or company winding up. This also means that the holder of such shares loses the right to redeem those stocks in the future for a stated price. However, this does not mean that the stock shares will never be redeemed.
The stocks will most likely be sold back under the New York Stock Exchange (NYSE) or the American Stock Exchange (ASX). It is important to note that the stocks will be offered in the original manufacturer's issue. If the shares are then later re-sold under a different symbol, then they become forfeited. There are many instances where these forfeited stocks may still be available. For instance, when a company issues additional common stock to complete a particular transaction. In other words, these stocks are considered as coming from an exchange-traded fund and are thus subject to the same regulations as the common stock issued by the company.
The loss of rights to recover your investment is one of the most disturbing facts about shares of stock. Loss of such shares can result from a number of causes. One is the simple loss of the company's ability to make profit. It may be that the company is insolvent. Another is if the company becomes bankrupt.
There are also instances where the loss of shares is due to the illegal conduct of the company's directors. These directors could be involved in any number of criminal activities, some of which are downright unlawful. Other reasons can include insider trading. This means that the shares sold to the public are sold below the per-share price. This could also lead to huge losses.
What is also interesting to note is that the shares can also be forfeited if the company defaults on its debt obligations. This could happen if it pays less than the amount it borrowed from different financial institutions. Moreover, it could also result from the failure of the company to pay the tax that it owes. This means that even though a company is not yet bankrupt, it may still have to face the loss of its outstanding shares.
The question of what is the forfeiture of shares? has been playing on the minds of shareholders for quite some time now. This is mainly because of the fact that the price of stocks has soared over the years. Also, this is why many wonder how they could still invest in a company where the price of its stocks is so high.
One answer to this question is that there is really no such thing as an "inalienable share". Strict requirements are needed before shares can be surrendered or auctioned. Aside from this requirement, there is also a performance bond that the company needs to comply with. This is done by filing the company's annual report with the Securities and Exchange Commission.
Now, you may be wondering how does the forfeiture of shares work. Once a shareholder is proven guilty of securities fraud, he or she would no longer be allowed to have any shares in the company. In other words, he or she would no longer be able to own shares of the company. However, one thing is for sure: once stocks are forfeited, they cannot be sold or traded again for at least three years. This is also applicable to any assets owned by the fraudulent shareholder.
