When a dividend is declared by a company but has not been paid or claimed within 30 days, the company shall transfer the amount to an Unpaid Dividend Account. If the money transferred to the Unpaid Dividend Account remains unpaid or unclaimed for a period of 7 years from the date of transfer, the amount shall be transferred to the Investor Education & Protection Fund.
All shares in respect of which dividend has not been paid or claimed for a period of 7 consecutive years or more shall be transferred by the company to the Investor Education & Protection Fund.
The Central Government has established the IEPF Authority for the administration of the Investor Education & Protection Fund. The central government of India appoints the Chairperson, CEO, and 6 members of the IEPF Authority.
The Secretary, Ministry of Corporate Affairs shall be the ex-officio Chairperson of the Authority. The IEPF Authority manages the IEPF funds and keeps separate accounts for the Recovery of Shares from IEPF and other pertinent records relating to the funds. This is done following consultation with the Comptroller & Auditor-General of India.
Causes of Unclaimed or Lost Shares-
- No Nominee- It is very common to see that investors leave their shares without a nominee following their passing. In this situation, the shares are still unclaimed because the legal heirs are ignorant of them. In such a situation, the shares along with the dividend are transferred to IEPF.
- Little Investments- When an investor makes a modest investment, they are more likely to forget about it. If the dividend remains unpaid or unclaimed for a period of 7 years or more, the company may transfer the amount to IEPF.
- Dispute- In cases where shares are attached to the court due to litigation involving a property dispute, the shares remain ownerless until the court issues its ruling.
- Dematerialization- Dematerialization is the process of converting physical things into digital form. Since the physical transfer of shares is prohibited by the Securities and Exchange Board of India (SEBI), physical shares may be transferred to IEPF.
A shareholder can file Form IEPF-5 on the Ministry of Corporate Affairs website to claim the shares from IEPF. The joint holder, legal heir, or nominee may claim shares from the IEPF of a deceased person in the event of the death of the shareholder.
Procedure for claiming Dividend and Shares from IEPF Authority-
STEP 1-
The shareholder should contact the Nodal Officer of the company and obtain year-wise dividend entitlement and share details transferred to the IEPF Authority.
STEP 2-
The shareholder should fill the Form IEPF-5 available on the website of the IEPF Authority. Shareholders will be given an SRN number to follow the status of the report when the Form has been submitted successfully.
The claimant has to mention the following details in the IEPF-5 form:
- Particulars of the Company
- Details of shares to be claimed
- Details of the amount claimed
- Year-wise details of securities/deposits
- Aadhar Card Number or Passport Number
- OCI/PIO Card Number (In case of NRI/foreigners)
- Details of Bank Account linked with Aadhar
STEP 3-
The shareholder must submit the original application and the required documents to the Nodal Officer. The Officer will verify the details of the claim and various documents submitted by the shareholder.
The documents that the applicant has to submit to the Nodal Officer are as follows-
- Original Physical share certificate
- Original bond Deposit certificate
- Debenture certificate
- Indemnity Bond
- Advance receipts
- Any other documents as enumerated in the IEPF-5 form duly signed by him.
STEP 4-
The company will prepare a verification report regarding the claim received. This report will be sent to the IEPF Authority within 15 days. On the basis of the verification report and the documents, the IEPF Authority will either approve the claim or ask the shareholder to resend the documents.
An application received for refund of any claim duly verified by the concerned company shall be disposed of by the Authority within 60 days from the date of receipt of the verification report from the company.
Where the Authority, on examining any application for a claim, finds it necessary to call for further information or finds such application or e-form or document to be defective or incomplete, the Authority shall give intimation of such information called for or defects or incompleteness, by e- mail on the email address of the claimant and the company, directing them to furnish such information or to rectify such defects or to re-submit such application within fifteen days from the date of receipt of such communication. If the applicant/claimant fails to do so, the Authority may reject the claim.
CONCLUSION-
The overall balance in the IEPF as of the 2021–2022 fiscal year is Rs. 5,262.25 Crore. The refund rate for the total amount of unclaimed money is currently less than 2%. Only 21.8 million of the 1.16 billion shares have been claimed by legitimate owners so far in terms of shares.
The general public is not well-informed about the steps that must be taken to obtain their dividends, shares, and other securities from the IEPF Authority which needs to be corrected.