Procedure of Recovery of Shares in India

Introduction

The securities were distributed in the form of paper certificates prior to the emergence of the dematerialized mode of trading. Since these security certificates are in physical form, there is a high likelihood that they will be ripped, misplaced, and lost. In some cases, even after the person whose name the shares were registered passed away, the heirs were unable to collect the money. According to some estimates, the IEPF claim received transfers of iepf unclaimed shares worth about 18 000 crores and unclaimed dividends worth about 2,300 crores.

The government established a system so that the iepf unclaimed shares that were transferred to the Investor Education and Protection Fund (IEPF claim) could be claimed back by the investors in question, together with any dividends and bonus shares.

The IEPF claim must make earnest efforts to raise awareness of shareholders’ rights since millions of crores of money remain unclaimed in the IEPF fund of the proper owners, and it is the responsibility of shareholders to seek expert assistance in reclaiming their legitimate holdings.

Recovery Of Shares In India

Even before the Demat system of dealing in securities became the standard, buying, selling, and keeping securities in paper format had been a common practice. Some of these securities, nevertheless, never underwent dematerialization and continue to exist in the form of physical paper. Due to time-related wear and tear, forgetfulness, or the death of the original security holder, these securities may get mangled and never enter the system again.

Recovery of Shares is the process of obtaining these securities and returning them to the security holder’s legitimate possession and ownership through the transmission of shares, transfer of company shares, recovery of unclaimed dividends, bonus issuance, etc.

Modes of Recovery of Shares

The basic mechanism for recovering shares depending on the claimant’s circumstances:

1. Shares are “transmitted” when they are legally transferred from the original stakeholder to the claimant or legal heir due to events like death, insolvency, insanity, marriage, or any other statutory cause other than a natural transfer. Once the transfer of company shares has been completed successfully, the claimant or legal heir is no longer merely the legitimate owner of the shares but also entitled to all associated rights. The following documentation must be submitted in order to transfer shares:

• Petition for the transfer of company shares from the legal heir
• Letters of Administration, Probate of Will, or 
• Succession Certificate, Certified Copy of Original Shareholder’s Death Certificate
• example of the legal heir’s or successor’s sign
• a PAN copy that has been self-attested

2. Share transfer: When a stock transfer occurs as a result of the founding shareholder’s voluntary act to the transferee for a consideration, it is referred to as a “share transfer.” The obligation of the transferor or the original shareholder ends at the time of the transfer of company shares and is passed to the transferee. The transfer deed is the legal document that is used to transfer shares.

The following scenarios may arise when a share transfer is required:

• Share certificates’ wear and tear: When shares are physically present, certificates are often transferred. When shares are held in physical form, there is a very high likelihood that the certificates may eventually become damaged, making it more challenging to transfer the shares.
• Certificate loss: Prior to the dematerialization of shares, physical certificates served as a record of each security. Given this, it makes sense that some of the certificates may have vanished or been misplaced during a move or while in transit. Getting the value of the shares back is extremely difficult in light of this.
• Not submitting the transfer deed: There have been many instances when the transferee has paid the required payment for the shares but has not yet turned in the form to the required body. In other words, the shares are still registered in the original shareholder’s name. In these circumstances, the transfer must be made by submitting the relevant form to the appropriate authority. Because of this, it requires the appropriate competence to do the stated assignment without any problems.
• Mismatch of the transferor’s signature: Because the certifications were obtained in the distant past and a lot of time has passed since then, the transferor’s signature has also changed, and this might make it difficult for him or her to complete the transfer because of the mismatch. These occurrences are frequent, but the experts hold the key to getting past this obstacle.

3. Transmission of Unclaimed Dividend: Businesses distribute annual dividends to their shareholders based on their profitability. The Investor Education and Protection Fund receives the dividends that stockholders fail to claim for a continuous period of seven years (IEPF claim). It should be highlighted that the money is put in the IEPF account rather than being forfeited by SEBI, and that the legislation affords the security holder the right to recover their securities.

For the reasons listed, a large number of investors haven’t yet reclaimed their securities:

• Inadequate execution of the Transfer or Transmission of Shares: This has usually been observed in situations where the securities were in physical form and the Transfer or Transmission was not carried out properly. Furthermore, execution of shares in situations of transmission was prevented due to unlawful steps taken by the legal successor, such as fraud and unqualified legal counsel.
• Inappropriate Records of the Shareholders: Because of improper and inaccurate information supplied by the security holder in the records, such as an erroneous name, age, residence, date of birth, or father’s name, the security holder is unable to earn dividends on his shares. The dividends are allocated to a different account due to inaccurate information in the records, depriving the genuine security holder of his payout.

4. Unclaimed Bonus stocks: Another less-discussed category is the bonus issuance of shares that the firm grants to its current shareholders as an additional benefit or bonus for owning the firm’s shares. When the genuine shareholder is unable to get the necessary registration in the records due to non-transmission, non-transfer of company shares, etc., the bonus issue of shares becomes an unclaimed bonus share. When a shareholder does not claim such a claim for a prolonged period of time, the shares are shifted to another fund, and the shareholder must follow the statute’s procedure in order to reclaim them.

Procedure Of Recovery Of Shares

• The claimant must complete the IEPF claim 5 form, which is available online.
• The claimant must fill out all the necessary information on the form, including their name, Aadhar information, firm name, the amount claimed, and information about their bank account and demat account, among other things.
• When the form is uploaded, it is processed, an SRN is produced, and when the pay option is selected, an acknowledgment is issued without actually completing a payment.
• Once you get the acknowledgment, you should send it to the company’s IEPF Nodal Officer along with a 

Mutual Funds

Even mutual funds fit within this category. Some estimates place the total value of unclaimed mutual fund deposits at 44000 crores. This is due to the fact that many consumers made investments in mutual funds before promptly forgetting about them. The problem with this, though, is that the Mutual Fund itself must be credited for these investments rather than the IEPF claim or the Ministry of Corporate Affairs.

The methods listed below are used to recover shares for the purpose of recovering shares:

• transfer of company shares automatically under the legislation.
• after completing the transfer document, the sale of shares for money.
• Claim for Investor Education and Protection Fund unclaimed dividends.
• Complimentary issues are returned to the title holder.

Conclusion

Giving the legitimate shareholders the chance to receive their money back through the Investor Education and Protection Fund is, in our view, a very positive effort by the MCA and SEBI. Additionally, it is the responsibility of the SEBI to educate investors and securities holders. To ensure that the process of recovering shares goes well and the legitimate shareholder receives his securities, it takes a great deal of skill and experience.