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Stock loss occurs when an investor fails to meet commitments related to ownership of shares, such as not paying call money. The issuer can cancel ownership privileges and repossess shares if the situation is not corrected. The loss must comply with the issuer’s bylaws and result in a benefit to the issuer. The investor may lose further dividend payments and may or may not receive compensation depending on jurisdiction.
Stock loss is a phenomenon where an investor fails to meet all commitments related to ownership of shares issued by a particular company. When those commitments are not paid in full within the time allowed, the issuer of the shares has the right to cancel all ownership privileges granted to the investor, including the right to collect dividends. Unless the situation is corrected, the shares will be forfeited and the investor’s name will be removed from the shareholder register maintained by the issuer.
The possibility of loss of shares occurs when an investor fails to meet the specific responsibilities outlined in the contract governing the original purchase of those shares. A common example is the shareholder failing to present what is known as call money to the issuer of the shares. Call money is money that is lent to manage short-term investments and that the issuer can call under certain circumstances. If the investor does not deliver the money within the allotted time, usually 14 calendar days, then the company has the right to repossess the investor’s shares.
Specific criteria must be met before a stock loss can be processed. Unless the conditions surrounding the forfeiture are in full compliance with the conditions set forth in the issuer’s bylaws and founding documents, it may be impossible to remove the shares from the investor. Furthermore, the loss must result in some type of definite benefit to the issuer. As a final requirement, the loss of shares cannot continue unless the issuer has made what is considered a reasonable effort to resolve the issue with the investor. Depending on the reasons behind the default, it is often within the discretionary powers of the issuer to create some type of workaround that allows the investor to retain the shares, possibly by allowing upcoming dividends to be used as payment of the so-called money.
The loss of shares is usually a serious loss for the investor. Once the forfeiture is processed and the shares are removed, the opportunity to receive further dividend payments is invalidated. Depending on the laws that prevail in the jurisdiction in which the issuer is based, the investor may or may not receive some final compensation for the lost shares. In some nations, the investor will receive nothing more than formal notice that the loss has been completed and informed that the investor no longer has any claim to the shares or any benefits related to the share.
Smart Asset.
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