12.8.15 (Surrender of Shares)

Surrender of shares means voluntary return of sharesby the shareholder to the company for cancellation. There is no provision for the surrender of shares either in the Act or in Table Abut the Articles of some companies may allow it as a short cut to the long procedure of forfeiture, where their forfeiture is justified [Trevor v. Whiteworth (1887) 12 App. Cases 409]. In any other circumstances, surrender of shares cannot be accepted without sanction of the

Court, as this would amount to a reduction of capital. In Mangal Sain u. Indian Merchants Bank Authority, [AIR (1920) Lah.240] the objector who had been placed in the list of contributories contended that he had surrendered his shares and the directors had under a clear power in the Articles, accepted the same. Held, that a company can only accept a surrender under conditions and limitations under which shares can be forfeited, which did not exist in the present case.

Mere handing over of share certificates cannot constitute surrender of shares [Vasant

Investment Corpn. Ltd., In rc (1982) 52 Comp. Cas. 139 (Bom.)]

Since shares can be surrendered only where their forfeiture is justified, a company can accept surrender of partly paid-up shares only. The only exception where fully paid up shares may be accepted is when shares are surrendered in exchange for new shares of the same nominal value (but with different rights). It is because, in such a case, the capital is not reduced but only replaced.

Surrendered shares may be re-issued in the same way as forfeited shares. If this is done, no reduction in capital occurs, However, no consideration can be paid by the company in exchange of surrendered shares since it would amount to purchase of its own shares, which is specifically prohibited under s.77. Thus, where the surrender was accepted in consideration of the discharge of the registered holder from his liability in respect of them, it was held that it amounted to purchase of its own shares by the company and was thus ineffective (Bellerby v. Rowland & Marwood Steamship Co.).