CS Priyanka Gera

Priyanka GeraExecutive Summary

Ministry of Corporate Affairs (hereinafter referred to as “MCA”) has issued notification on Investor Education and Protection Fund Authority (Appointment of Chairperson and Members, holding of meetings and provision for offices and officers) Rules, 2016 (hereinafter referred to as “IEPF Rules”) in order to exercise the powers conferred by sub-sections (5), (6) and (7) of Section 125 read with Section 469 of the Companies Act, 2013 (hereinafter referred to as “the Act”).

The Central Government has appointed January 13, 2016 as the date on which the said provisions shall come into force as published in the Official Gazette.

IEPF rules shall define the composition, Chairperson, Chief Executive Officer, members of the authority and related matters on the same.

A. Investor Education and Protection Fund (IEPF)

The Central Government shall establish a Fund to be called the Investor Education and Protection Fund (herein referred to as the Fund) under Section 125 of the Act the following amounts will be credited to the Fund:-

a) the amount given by the Central Government by way of grants after due appropriation made by Parliament by law in this behalf for being utilised for the purposes of the Fund;

b) donations given to the Fund by the Central Government, State Governments, companies or any other institution for the purposes of the Fund;

c) the amount in the Unpaid Dividend Account of companies transferred to the Fund under sub-section (5) of section 124;

d) the amount in the general revenue account of the Central Government which had been transferred to that account under sub-section (5) of section 205A of the Companies Act, 1956 (1 of 1956), as it stood immediately before the commencement of the Companies (Amendment) Act, 1999 (21 of 1999), and remaining unpaid or unclaimed on the commencement of this Act;

e) the amount lying in the Investor Education and Protection Fund under section 205C of the Companies Act, 1956 (1 of 1956);

f) the interest or other income received out of investments made from the Fund;

g) the amount received under sub-section (4) of section 38;

h) the application money received by companies for allotment of any securities and due for refund;

i) matured deposits with companies other than banking companies;

j) matured debentures with companies;

k) interest accrued on the amounts referred to in clauses (h) to (j);

l) sale proceeds of fractional shares arising out of issuance of bonus shares, merger and amalgamation for seven or more years;

m) redemption amount of preference shares remaining unpaid or unclaimed for seven or more years; and

n) such other amount as may be prescribed, provided that no such amount referred to in clauses (h) to (j) shall form part of the Fund unless such amount has remained unclaimed and unpaid for a period of seven years from the date it became due for payment.

B. Investor Education and Protection Fund Authority (IEPF Authority)

1. Composition

1.1 The Authority shall consist of:

a) Chairperson – The Secretary, Ministry of Corporate Affairs shall be the ex-officio Chairperson of the Authority

b) Six members- The Central Government may appoint members who shall hold office for a period of three years and shall be eligible for re-appointment as prescribed.

c) Chief Executive Officer (CEO)- The Central Government person to be the CEO

1.2 The Central Government shall remove a member from office after giving a reasonable opportunity of being heard, if he:

a) is, or at any time has been, adjudicated as insolvent;

b) is of unsound mind and stands so declared by a competent court;

c) has been convicted of an offence which. in the opinion of the Central Government, involves a moral turpitude:

d) has, in the opinion of the Central Government, so abused his position as to render his continuation in office detrimental to the public interest.

2. Functions

a) The Authority shall have the duty to administer the Fund for lnvestor Education and Protection.

b) The general management of the affairs of the Authority shall vest in the Chief Executive Officer, who may exercise powers, which may be authorised by the Authority.

c) The Chief Executive Officer shall function under superintendence and direction of the Chairperson.

d) The Authority may constitute permanent Committees for overseeing its functions;

e) Each Committee shall comprise two members, Chief Executive Officer and concerned functional head. who shall be the secretary of the Committee. Thc Committee shall be headed by an ex-officio member;

f) The Committee may invite experts with special knowledge and expertise as and when required to assist it on any specific issue;

g) The Authority may outsource, if required. work related to Funds and Shares Management.

h) The broad functional divisions of the Authority shall be as per Schedule II to these rules

Conclusion

The Central Government has notified few provisions of Section 125 of the Act considering in mind the requirement of investor protection. It has categorically mentioned the provisions related to the appointment of members, chairperson and other officers including their defined functions.

Disclaimer

This document is intended to give an update on IEOF rules and should not be regarded as offering a complete explanation of the matters referred to. The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. You are requested to seek professional guidance and advice before acting on any of the matters dealt with in this document.

(Author can be reached at Pri.gera05@gmail.com)

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