The Ministry of Corporate Affairs on 28th February, 2017 amended the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 by notifying IEPF Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2017.
The major amendments made by MCA are related to the Transfer of Equity Shares by Company to IEPF Authority in case any shareholder fails to en-cash Dividend Warrants issued by company in any of the last 7 (seven) consecutive years.
This article is a Detailed Analysis of the amendments made by MCA in the existing IEPF Rules.
Effective Date:
These rules are in force from the 28th February, 2017.
Detailed Analysis of the IEPF Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2017 is as follows:
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Rule No. |
IEPF Authority Rules, 2016 Vs. IEPF Authority Amendment Rules, 2017 | Comments |
| 2(1)(d) | “Company” means company as defined in sub-section (20) of section 2 of the Act and includes ‘corresponding new bank’ as defined in sub-section (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) and clause (b) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980)
The Rule 2 (1) (d) has been redrafted as : “Company” means a company defined in sub-section (20) of section 2 of the Act and includes ‘corresponding new bank’ as defined in sub-section (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) and clause (b) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980) and ‘subsidiary bank’ as defined in clause (k) of section 2 of State Bank of India (Subsidiary Bank) Act, 1959 (38 of 1959) |
The subsidiary banks of SBI as defined in clause (k) of section 2 of State Bank of India (Subsidiary Bank) Act, 1959 (38 of 1959 have been included in the definition of the term ‘Company’ for the purpose of these rules. |
| 3(2)(g) | All amounts payable as mentioned in sub-section (3) of section 10B of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and section 10B of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980;
The Rule 3 (2) (g) has been redrafted as : All amounts payable as mentioned in sub-section (3) of section 10B of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, section 10B of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 and section 40A of the State Bank of India (Subsidiary Bank) Act, 1959 |
The Rule after the amendment shall now include All amounts payable as mentioned in section 40A of the State Bank of India (Subsidiary Bank) Act, 1959. |
| 6 | In the principal rules, rule 6, the following rule shall be substituted : |
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| 6 (1) | Manner of transfer of shares under sub-section (6) of section 124 to the Fund.- (1) The shares shall be credited to an IEPF suspense account (on the name of the company) with one of the depository participants as may be identified by the Authority within a period of thirty days of such shares becoming due to be transferred to the Fund:
Provided that, in case the beneficial owner has en-cashed any dividend warrant during the last seven years, such shares shall not be required to be transferred to the Fund even though some dividend warrants may not have been en-cashed. The following Proviso has been inserted: Provided further that in cases where the period of seven years provided under sub-section (5) of section 124 has been completed or being completed during the period from 7th September, 2016 to 31st May, 2017, the due date of transfer of such shares shall be deemed to be 31st May, 2017. |
Major Relief & Clarity provided:
The was lot of confusion regarding the LAST DATE of Compliance in cases 7 years has already been completed when the principle rules were notified. This amendment brings clarity on the same as well as it provides extension to the Companies to transfer shares with the IEPF Authority by 31st May, 2017. |
| 6 (3) (a) | (3) The company shall follow the following procedure, namely:-
(a) The company shall inform at the latest available address, the shareholder concerned regarding transfer of shares three months before the due date of transfer of shares and also simultaneously publish a notice in the leading newspaper in English and regional language having wide circulation, and on their website giving details of such shareholders and shares due for transfer: The Following Proviso has been omitted: Provided that in cases, where the seven years as provided under sub-section (5) of section 124 have been completed or are being completed within three months from the date of coming into force of these rules, the company shall initiate the aforesaid procedure immediately and transfer the shares on completion of three months; The Rule 6 (3) (a) has been redrafted as : (a) The company shall inform, at the latest available address, the shareholder concerned regarding transfer of shares three months before the due date of transfer of shares and also simultaneously publish a notice in the leading newspaper in English and regional language having wide circulation informing the concerned that the names of such shareholders and their folio number or DP ID – Client ID are available on their website duly mentioning the website address. |
· Rule (6)(3)(a) has been redrafted and it provides that while the company published a notice regarding transfer of shares to the IEPF Authority the notice shall mention the Names of Such Shareholders and their folio number or DP ID – Client ID are available on their website duly mentioning the website address of the company. · The first proviso has been omitted from the rules as the amendment rules has prescribes the time limit for transferring shares with IEPF under rule 6(1) as discussed above.6 (3) (C) |
| (c) For the purposes of effecting the transfer where the shares are dealt with in a depository,-
(i) the Company Secretary or the person authorised by the Board shall sign on behalf of such shareholders, the delivery instruction slips of the depository participants where the shareholders had their accounts for transfer in favour of IEPF suspense account (name of the company); (ii) on receipt of the delivery instruction slips, the depository shall effect the transfer of shares in favour of the Fund in its records. The Rule 6 (3) (c) has been redrafted as : For the purposes of effecting the transfer, where the shares are dealt with in a depository– (i) the Company shall inform the depository by way of corporate action, where the shareholders have their accounts for transfer in favour of the Authority. (ii) on receipt of such intimation, the depository shall effect the transfer of shares in favour of DEMAT account of the Authority. |
· The Major change here is: It shall now be responsibility of the company to Dematerialise the shares which are to be transferred to the DEMAT account maintained by the IEPF Authority. | |
| 6 (3) (D) | (d) For the purposes of effecting the transfer where the shares are held in physical form,-
(iv) after issue of duplicate share certificates, the Company Secretary or the person authorised by the Board, shall sign the necessary Form No. SH 4 i.e., securities transfer Form as specified in the Companies (Share Capital and Debentures) Rules, 2014, for transferring the shares in favour of the Fund; The Following Proviso has been omitted: (v) on receipt of the duly filled transfer forms along with the duplicate share certificates, the Board or its Committee shall approve the transfer and thereafter the transfer of shares shall be effected in favour of the Fund in the records of the company. The Rule 6 (3) (d) (iv) has been redrafted as : (iv) after issue of duplicate share certificates, the company shall inform the depository by way of corporate action to convert the duplicate share certificates into DEMAT form and transfer in favour of the Authority. |
· The Rule 3(d) has been modified and it now states the Company shall convert the physical shares to DEMAT form and then transfer the shares in favour the IEPF Authority.
· Rule 3 (D) (v) has been omitted. |
| 6 (7) | Once the physical shares are transferred in the name of the Authority, the Authority shall dematerialise these shares and it shall keep only those shares in physical form, where dematerialisation of shares is not possible.
The Rule 6 (7) has been redrafted as : (7) The company shall maintain the details of shareholding of each individual shareholders whose shares have been credited to the DEMAT account of the Authority. |
· The rule has been amended and it now provides that the company shall Dematerialise the shares before they are being transferred to IEPF Authority’s DEMAT Account and shall also maintain details of shareholding of each individual shareholders. |
| 6 (8) | The Authority shall maintain IEPF suspense account (name of the company) with depository participant on behalf of the shareholders who are entitled for the shares and all benefits accruing on such shares e.g. bonus shares, split, consolidation, fraction shares etc. except right issue shall also be credited to such IEPF suspense account (name of the company).
The Rule 6 (8) has been redrafted as : All benefits accruing on such shares e.g., bonus shares, split, consolidation, fraction shares etc., except right issue shall also be credited to such DEMAT account. |
· It shall now be a responsibility of the Company to credit any benefit accruing on the shares transferred to the IEPF Authority’s DEMAT Account except shares being issued under Rights Issue. |
| 6 (9) | The shares held in such IEPF suspense account shall not be transferred or dealt with in any manner whatsoever except for the purposes of transferring the shares back to the claimant as and when he approaches the Authority or in accordance with sub-rule (10) and (11).
The Rule 6 (3) (9) has been redrafted as : (9) The shares held in such DEMAT account shall not be transferred or dealt with in any manner whatsoever except for the purposes of transferring the shares back to the claimant as and when he approaches the Authority or in accordance with sub-rule (10) and (11). |
· The Term ‘IEPF Suspense Account’ has been Replaced with ‘DEMAT Account’ as the shares are now to maintained by IEPF in DEMAT form only. |
| 7 (4) | Refunds to claimants from Fund
After verification of the entitlement of the claimant- (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. The Rule 7 (4) (b) has been Amended as: (b) to the shares claimed, the Authority shall issue a refund sanction order with the approval of the Competent Authority and shall credit the shares to the DEMAT account of the claimant to the extent of the claimant’s entitlement. |
· The rule has been redrafted to include the term ‘DEMAT Account’ instead of ‘IEPF Suspense Account’ as the shares are now to maintained by IEPF in DEMAT form only.
· The Authority (i.e IEPF) on request / claim by the shareholder shall Credit the Shares held by it to the Claimant’s DEMAT Account. |
| 7 (7) | In cases, where the application is incomplete, a communication shall be sent to the claimant by the Authority detailing deficiencies of the application.
The Rule 7 (7) has been Amended as: In cases, where the application is incomplete or not approved, a communication shall be sent to the claimant and the concerned company by the Authority detailing deficiencies of the application. |
· The Rule has been amended and it states that a communication shall be sent to the claimant and the concerned company in case any deficiencies if found by the Authority in the Application. |
| 7 (9) | Newly Inserted Rule:
(9) In case, claimant is a legal heir or successor or administrator or nominee of any other registered security or in cases where request of transfer or transmission of shares is received after the transfer of shares by company to the Authority, the company shall verify all requisite documents required for registering transfer or transmission and shall issue letter to the claimant indicating his entitlement to the said security and furnish a copy of the same to the Authority while verifying the claim of such claimant. |
This rule has been inserted by the amendment and states:
In case the claimant to the shares held by the Authority is a legal heir or successor or administrator or nominee of the Shareholder. It shall be duty of the Company to verify all requisite documents required for registering transfer or transmission and shall issue letter to the claimant indicating his entitlement to the said security and furnish a copy of the same to the Authority. |
Author: CS Rahul Harsh , from Kolkata is an Associate member of the ICSI and may be contacted at: csrahulharsh@gmail.com.
bought 400 shares in 1997 which were locked for transfer under crb capital/sebi scam in Delhi high court.Despite orders from special committee of Delhi high court and their order to release all corporate benefits from 1997 MCS/GAIL has not yet paid me dividends since 97 to 2008 despite reminders and notice for contempt of court case,kindly advise how i could get it now
I want to confirm about second proviso of sub rule 1 of rule 6 of IEPF rules.
In my case due date of transfer of unclaimed dividend was 18th November, 2014 and 18th November, 2015. Shall i required to transfer that shares for those due date ?
A company has declared dividend during the FY 2000-01 and the the unclaimed dividend has been transferred to IEPF during 2008. Kindly let me know if this rule apples to the Companies who have transferred Unclaimed Dividend to IEPF in the year 2008.