Form 5 INV is not required to be filed in every case

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When a Company is required to file form 5 INV?

As per Rule 3 of Investor Education and Protection Fund (Uploading of information regarding   unpaid & unclaimed amount lying with companies) Rules 2012, every company (including Non-banking Financial companies and Residuary Non-Banking Companies) shall, within a period of 90-days  after the holding of Annual General Meeting or the date on  which it should have been held as per the provisions of section 166 of the Act and every year thereafter till completion of seven years period, identify the unclaimed amounts as referred in sub-section (2) of section 205C or in Act, separately furnish and upload on its website and also on the Ministry’s website or any other website as may be specified by the Government a statement or information through e Form 5 INV’ separately for each year’ containing following information, namely:

a) the names and last known addresses of the persons entitled to receive the sum;

b) the nature of amount;

c) the amount to which each person is entitled;

d) the names and last known addresses of the persons entitled to receive the sum;

e) the nature of amount;

f) the amount to which each person is entitled;

When  a co is required  to credit amount to investor education & protection fund?

As per clause (b) of sub sec 2 of Sec 205C, the application moneys received by companies for allotment of any securities and “due” for refund  shall be credited to Investor protection & Education fund;

Provided that no such amounts referred as above shall form part of the Fund unless such amounts have remained unclaimed and unpaid for a period of seven years from the date they became due for payment.

In short, Application amount shall be transferred to such fund ONLY  after  expiry of 7 years from the date it becomes “due”.

When does share application money becomes “due” for payment?

A question arises when does such application money become “due” under the Companies Act, 1956?

The companies Act, 2013, prescribes that share application money shall be refunded with 15 days from the expiry of 60 days from the date of receipts of application money. However, there is no such restriction under the companies Act, 1956. Should we assume that there is a blanket allowance  & company can keep share application money without any limit of refund. I am of the firm view that if any share application money is received, company should in its board meeting either reject or accept application (within next 2-3 board meetings).To be on safer side, date of Board meeting on which   decision  to refund application has been taken, may be considered as “due date” under Companies Act, 1956.

Circumstances when form 5 inv is required to be filled:

1) Company shall identify the unclaimed amounts of share application “due” within a period of 90-days  after the holding of Annual General Meeting.

2) Hence, if application money is not due within such 90 days, company is not required to file Form 5 INV.

3) However, kindly read above para, to determine whether an application money is due or not.

Example 1: A company received share application money in Jan 2011, which is lying in the share application a/c as on 31.3.13 & non compliance notice is received from ROC.

Case (a): Such money had already been refunded before 90 days from the date of AGM or

Case (b): Share had been allotted before 90 days from the date of AGM. However, Return of allotment had not been filed.

Case (c): Co with mutual consent transferred investment to shareholder in lieu of application money after 31.3.2013, but before 90 days from the date of AGM.

Case (d): Co with mutual consent converted share application money to Loan after 31.3.2013, but before 90 days from the date of AGM.

Suggestions:

Case (a): Reply to ROC stating the fact that as money had been refunded before 90 days from the date of AGM, the company had identified the unclaimed amounts as “NIL” & hence such form had not been submitted.

Case (b):

– File  Return of Allotment now &

– Submit a reply to ROC stating the fact that as shares had been allotted before 90 days from the date of AGM, company had identified, the unclaimed amounts as NIL & hence such form had not been submitted.

Case (c): Reply to ROC stating the fact that the company had identified the unclaimed amounts as “NIL” & hence such form had not been submitted.

Case (d): Reply to ROC stating the fact that the company had identified the unclaimed amounts as “NIL” & hence such form had not been submitted.

Example 2: A company received share application money in Jan 2011, which is lying in the share application a/c as on 31.3.13 & non compliance notice is received from ROC. Such money had either already been refunded or share had been allotted  before 1.4.14. However, Return of allotment had not been filed.

Suggestions:

a) Form 5 INV  now. Also file  Return of Allotment, if shares had been allotted . As allotment has been made under Companies Act, 1956, MGT 14 is not required to be filled.

b) Submit a reply to ROC stating that due to inadvertent such form had not been filed . However, it has already been filed.

c) Kindly note that Application amount is required to be transferred to such fund only after 7 years from the date it becomes “due”.

d) After filling such form, an acknowledgement will be generated (see attachment) . In such acknowledgement, you are requested to upload all the investor wise details of unclaimed and unpaid amounts on IEPF portal within l4 days of filings Form5lNV. While uploading such list, you will be asked to mention proposed date of  transfer to the account of Central Govt . You have to be careful while filling this date.  This date should be a date after the expiry of  7 years from the date it becomes “due”.

Example 3: A company received share application money in Jan 2014, which is lying in the share application a/c as on 31.3.14. Co with mutual consent converted share application money to Loan after 31.3.2014. Can company do so?

Suggestions:  No, company cannot adjust share application amount & company have to refund it to the applicant w.e.f  01.04.2014 . As per Explanation (b) to clause (vii) of the definition of deposit under Companies (acceptance of deposit) Rules, 2014 , any adjustment of share application money shall not be treated as refund.  As per  sec 42(6),  A company making an offer or invitation under this section shall allot its securities within sixty days from the date of receipt of the application money for such securities and if the company is not able to allot the securities within that period, it shall repay the application money to the subscribers within fifteen days from the date of completion of sixty days and if the company fails to repay the application money within the aforesaid period, it shall be liable to repay that money with interest at the rate of twelve per cent. per annum from the expiry of the sixtieth day: monies received on application under this section shall be kept in a separate bank account in a scheduled bank and shall not be utilised for any purpose other than—

(a) for adjustment against allotment of securities; or

(b) for the repayment of monies where the company is unable to allot securities.

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