Investor Education and Protection Authority: Investor point of view By Jaya Ahuja


Overview:

When the shareholder fails to claim his/ her dividend on share for a period of 7 years, then in accordance with the provisions of Companies act 2013, the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 and the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2017 the unclaimed dividend gets transferred to the IEPF.

Purpose:

The provision of the Companies Act 2013 requires the company to transfer the unpaid dividend to IEPF established by the central government after the expiry of a period of 7 years. As per section 125(2) of the Companies Act and IEPF Rules 2016, certain amounts are required to be credited to the Fund (IEPF) which include –

  • donations were given to the Fund by the Central Government, State Governments, companies or any other institution for the purposes of the Fund;
  • the amount transferred to the Unpaid Dividend Account of a company and which remains unpaid or unclaimed for a period of seven years from the date of such transfer;
  • the amount lying in the Investor Education and Protection Fund under section 205C of the Companies Act, 1956;
  • the application money received by companies for allotment of any securities and due for a refund which has remained unclaimed and unpaid for a period of seven years from the date it became due for payment;
  • matured deposits with companies other than banking companies which have remained unclaimed and unpaid for a period of seven years from the date it became due for payment;
  • matured debentures with companies which have remained unclaimed and unpaid for a period of seven years from the date it became due for payment;
  • redemption amount of preference shares remaining unpaid or unclaimed for seven or more years, due, unpaid or unclaimed interest on matured deposits transferred to the Fund, due, unpaid or unclaimed interest on matured debentures transferred to the Fund etc.
These amounts have to be transferred by the company to the fund within a period of thirty days from the date of expiry of seven years from the date of transfer of the amount to the unpaid dividend account.

Applicable Laws:

  • Companies act 2013;
  • Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016; and
  • Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2017
The Ministry of Corporate Affairs (MCA) had also notified the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer & Refund) Rules 2016, which allows claimants to seek the refund from the IEPF.

For Investors: How to Claim?

Here is the Procedure as stated in the gazette notification of refunds to claimants from Fund:

(1) Any person, whose shares, unclaimed dividend, matured deposits, matured debentures, application money due for refund, or interest thereon, sale proceeds of fractional shares, redemption proceeds of preference shares, etc. have been transferred to the Fund, may claim the shares under provision to sub-section (6) of section 124 or apply for refund, under clause (a) of sub-section (3) of section 125 or under proviso to sub-section (3) of section 125, as the case may be, to the Authority by making an application in Form IEPF 5 online available on website www.iepf.gov.in along with fee, as decided by the Authority from time to time in consultation with the Central Government, under his own signature.

(2) The claimant shall after making an application online in Form IEPF-5 under rule (1), send the same duly signed by him along with, requisite documents as enumerated in Form IEPF-5 to the concerned company at its registered office for verification of his claim.

(3) The company shall, within fifteen days of receipt of claim form, send a verification report to the Authority in the format specified by the Authority along with all documents submitted by the claimant.

(4) After verification of the entitlement of the claimant-

a) to the amount claimed, the Authority and then Drawing and Disbursement Officer of the Authority shall present a bill to the Pay and Accounts Office for e- payment as per the guidelines.

b) to the shares claimed, the Authority shall issue a refund sanction order with the approval of the Competent Authority and shall either credit the shares which are lying with depository participant in IEPF suspense account (name of the company) to the demat account of the claimant to the extent of the claimant’s entitlement or in case of the physical certificates, if any, cancel the duplicate certificate and transfer the shares in favour of the claimant.

(5) The Authority shall, in its records, cause a note to be made of all the payments made under sub-rule (4).

(6) An application received for refund of any claim under this rule duly verified by the concerned company shall be disposed of by the Authority within sixty days from the date of receipt of the verification report from the company, complete in all respects and any delay beyond sixty days shall be recorded in writing specifying the reasons for the delay and the same shall be communicated to the claimant in writing or by electronic means.

(7) In cases, where the application is incomplete, a communication shall be sent to the claimant by the Authority detailing deficiencies of the application.

(8) In case, the claimant is a legal heir or successor or administrator or nominee of the registered security holder, he has to ensure that the transmission process is completed by the company before filing any claim with the Authority.

(9) The claimant shall file only one consolidated claim in respect of a company in a financial year.

(10) The company shall be solely liable under all circumstances whatsoever to indemnity the IEPF Authority in case of any dispute or lawsuit that may be initiated due to any incongruity or inconsistency or disparity in the verification report or otherwise. The IEPF Authority shall not be liable to indemnify the security holder or Company for any liability arising out of any discrepancy in verification report submitted etc. leading to any litigation or complaint arising thereof.
 
Here is the link to download updated IEPF form -5 required for claiming the refund from the Fund:  http://www.iepf.gov.in/IEPF/Forms/IEPF-5_help.zip

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