In general, when one forfeits something, it means that one has lost the rights which have been previously held or could have been maintained if certain conditions had been met. In the context of property rights, forfeiture takes place when one is stripped of the rights to property, such as a piece of real estate. This usually takes place when one fails to meet the requirements or conditions set for the acquisition of the property. For example, if one is no longer able to make mortgage payments, the rights to the property may be forfeited.
In the context of shares, on the other hand, the term “forfeiture” may refer to the forfeiture of shares. A share is considered forfeited if the buyer does not comply with the conditions set for the completion of the purchase. The inability to make the full payment for related obligations is just one of the possible reasons for the forfeiture of a share. There are, for example, shares which should not be sold within a certain period of time. If the owner violates this condition, then this would likely result in the forfeiture of the share. Also, if the share was issued by a company as part of an employee share option and an employee resigns from the company, this may be a reason for that individual’s shares to be forfeited.
Once a share is forfeited, the entity who previously owned it no longer has to meet any obligations in relation to the share. Of course, any benefit to be enjoyed from share ownership is also stripped from him, as the share is reverted back to the issuing company.
