WHAT IS THE DIFFERENCE BETWEEN LIEN ON SHARES & FORFEITURE OF SHARES

  • A lien on shares prevents the shareholder from transferring his shares unless he pays the debt that the Company owes him. Whereas a forfeiture of shares means to expropriate/ take away shares from a shareholder by penalizing him for default of payment in calls.
  • A lien is exercised on non-payment of debt and other liabilities while a forfeiture is exercised on failure to make payments on calls. This means that liens are general while forfeitures are more specific.
  • If the shares held under lien are sold and a surplus is acquired, the surplus is given to the shareholder after deducting the amount due to the Company, but for re-issued forfeited shares, the Company retains the surplus.
  • Lien on shares does not re-structure the share capital by increasing nor reducing it, whereas a forfeiture results to reduction in share capital if the shares are not re-issued.
  • Shares acquired through lien can only be sold, whereas forfeited shares can either be re-issued or cancelled.