Forfeited Share


DEFINITION of 'Forfeited Share'

A share in a company that the owner loses (forfeits) by failing to meet the purchase requirements. Requirements may include paying any allotment or call money owed, or avoiding selling or transferring shares during a restricted period. When a share is forfeited, the shareholder no longer owes any remaining balance, surrenders any potential capital gain on the shares and the shares become the property of the issuing company. The issuing company can re-issue forfeited shares at par, a premium or a discount as determined by the board of directors.

BREAKING DOWN 'Forfeited Share'

In certain cases, companies allow executives and employees to receive a portion of their cash compensation to purchase shares in the company at a discount. This is commonly referred to as an employee stock purchase plan. Typically, there will be restrictions on the purchase (i.e. stock cannot be sold or transferred within a set period of time after the initial purchase). If an employee remains with the company and meets the qualifications, he or she becomes fully vested in those shares on the stated date. If the employee leaves the company and/or violates the terms of the initial purchase he or she will most likely forfeit those shares.

  1. Employee Stock Option - ESO

    A stock option granted to specified employees of a company. ESOs ...
  2. Equity

    Equity is the value of an asset less the value of all liabilities ...
  3. Shareholder

    Any person, company or other institution that owns at least one ...
  4. Stock

    A type of security that signifies ownership in a corporation ...
  5. Employee Stock Ownership Plan - ...

    A qualified, defined contribution, employee benefit (ERISA) plan ...
  6. Forfeiture

    The loss of any property without compensation as a result of ...
Related Articles
  1. Investing Basics

    Get The Most Out Of Employee Stock Options

    These plans can be lucrative for employees - if they know how to avoid unnecessary taxes.
  2. Entrepreneurship

    Is An ESOP Right For Your Business?

    Discover how to transfer your company's net worth to the next generation of entrepreneurs.
  3. Options & Futures

    The "True" Cost Of Stock Options

    Perhaps the real cost of employee stock options is already accounted for in the expense of buyback programs.
  4. Options & Futures

    Avoid Premature Exercise On Employee Stock Options

    With early exercise, you forfeit some profit back to your employer, and incur income tax to boot.
  5. Options & Futures

    Expensing Employee Stock Options: Is There A Better Way?

    In 2009, Senators Carl Levin and John McCain introduced a bill to stop the excessive deductions for ESOs. But is there another solution?
  6. Options & Futures

    Putting Management Under The Microscope

    We tell you where to find the telltale signs of corporate misdeeds.
  7. Investing

    What is Cumulative Preferred Stock?

    Cumulative preferred stock is a type of stock that stipulates any skipped or omitted dividends must be paid to its holders before common shareholders can receive dividends.
  8. Mutual Funds & ETFs

    How to Lower Investment Account Fees in Retirement

    Retired investors need all the money they have, which is why they should keep an eye on investment fees, as high fees can lower returns.
  9. Professionals

    How to Deal with Restricted Stock Units

    RSUs can be an important part of an employee's compensation package. Here's how to help clients understand how they differ from traditional stock options.
  10. Investing

    The Best Strategies to Manage Your Stock Options

    We look at strategies to help manage taxes and the exercise of incentive and non-qualified stock options.
  1. Does my employer's matching contribution count towards the maximum I can contribute ...

    Contributions to 401(k) plans come from employee salary deferral and employer match dollars. According to the IRS, employees ... Read Full Answer >>
  2. How is marginal propensity to save calculated?

    Marginal propensity to save is used in Keynesian macroeconomics to quantify the relationship between changes in income and ... Read Full Answer >>
  3. Why should investors research the C-suite executives of a company?

    C-suite executives are essential for creating and enacting overall firm strategy and are therefore an important aspect of ... Read Full Answer >>
  4. How does the always be closing (ABC) strategy benefit a salesperson's sales funnel?

    It is good practice in sales to always be closing, because it's common for a salesperson's sales funnel to be leaky. When ... Read Full Answer >>
  5. How reliable or accurate is marginal analysis?

    Marginal analysis is designed to show how economic reasoning allows actors to accomplish more by understanding limits on ... Read Full Answer >>
  6. What is the difference between a principle agent problem and moral hazard?

    Principal-agent problems and moral hazards are related in that one gives rise to the other. Principal-agent problems occur ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  2. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  3. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  4. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  5. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  6. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!