Guidelines For recovery of shares in India

SEBI, the industry regulator, has issued simplified and standardised guidelines for investor service requests, including establishing a framework for providing PAN, KYC details, bank details, signature, concern of duplicate shares, change of status for NRIs, nomination description, and other information by holders of physical shares. SEBI has also urged corporations and RTAs to execute such requests using papers received via registered emails and E-signature. In this article we will discuss important and latest guidelines regarding the IEPF unclaimed shares.

SEBI has made it essential for all physical shareholders to provide their PAN, nomination (for all eligible folios), contact information, bank account information, and specimen signature. If any of the above-mentioned facts or documentation are not accessible, the RTA will freeze the Folio on or after April 1, 2023. Recovery of shares in India has become the easiest and fastest process due to Government of India’s latest guidelines and investors’ friendly regulation, these days one can easily access IEPF unclaimed shares funds. 

It further specifies that the frozen accounts will be submitted to the administering authorities under the Benami Transactions (Prohibitions) Act, 1988 and possibly the Prevention of Money Laundering Act, 2002 if they remain frozen until December 31, 2025.

In light of the new legislation, it is critical that all holders of physical shares begin the process of amending their information in the company’s records and recovering their shares as soon as possible.

Process of recovery of shares in India from IEPF unclaimed shares

The Investor Education and Protection Fund Rules, 2017, were published by the Ministry of Corporate Affairs. According to the provisions of these rules, any amount transferred to the company’s Unpaid Dividend Account pursuant to Section 124(1) of the Companies Act. 2013, which remains unpaid or unclaimed for more than 7 years from the date of declaration dividend shall be transferred to the Investor Education and Protection Fund, along with any interest accrued (IEPF). The corporation must submit a statement to the IEPF Authority detailing the specifics of the transfer in the appropriate format, and the authority must provide a receipt as verification of the transfer.

In the instance of shares where the dividend has not been paid or claimed for more than 7 years, the corporation must transfer the shares to the IEPF and attach a document detailing the transfer.

Procedure for Filing an IEPF unclaimed shares for recovery of shares in India

Any shareholder whose stocks, unclaimed dividends, matured deposits or debentures, application money to be reimbursed and interest accumulated on the same, if any, money raised of fractional shares, etc. have been transmitted to the IEPF can claim the shares under the procedure outlined in subsection (6) of section 124 or can apply under clause (a) of subsection (3) of section 125 to the concerned officials.

Important note:

• In a financial year, a claimant can only make one consolidated claim for a firm against one Aadhaar Number. The aggregated claim must include data from numerous Folios from the same firm.
• If the claimant is the legal heir, successor, or nominee of the registered shareholder, he or she must first guarantee that the firm completes the transmission procedure and issues an entitlement letter to the legal heirs before filing the IEPF Claim with the authorities.

Process of recovery of share and finding lost shares 

Step 1: The Authority Claimant

A person who wishes to claim the shares back in his or her name should submit an IEPF Form-5 to MCA. The following information must be included on the form:

1. The applicant’s/personal claimant’s information.

2. The company’s information, including the CIN number

3. Information on the shares to be claimed

4. Information about the amount of the dividend to be claimed

5. Deposits and securities details are shown by year.

6. If the applicant is an Indian citizen, they must provide their Aadhaar number; if the applicant is an NRI or foreigner, they must provide their passport/OCI or PIO card number. Any other kind of identification must first be approved by the Authority.

7. Details of the bank account that is connected to Aadhaar and to which the claim would be refunded if the claimant is a Resident Indian. (Following a recent Supreme Court of India decision, Aadhaar linking is no longer required.)

There is no opportunity to attach extra documents in the form.

Step 2: Presenting the Claimant to the Company

After completing the online refund form as directed, the claimant should email it to the company’s Nodal Officer/Registrar, together with the documents listed below. This should be mailed in an envelope labelled “Claim for reimbursement from IEPF authority.” This is essential for the claim to be verified. The following papers must be attached:

1. Printout of a correctly filled-out IEPF-5 with the claimant’s signature on each page (bottom).

2. A copy of the acknowledgment with the SRN number SRN#SRN#SRN#SRN#SRN#S

3. Original indemnification bond with the claimant’s signature: If the claim exceeds Rs. 10,000, a non-judicial stamp paper bond shall be used. Plain paper can be used for the bond if the claim is smaller than this amount. Non-judicial stamp paper of the amount stated in the Stamp Act should be used if the claim is for a return of shares.

4. Original Advance Stamped Receipt with claimant’s and witnesses’ signatures. (Affix your signature to the revenue receipt.)

5. Original certificates in the event of a matured deposit or debenture being refunded. (Duplicate formalities should have been performed in case of loss.)

6. For Indian nationals, an Aadhaar card is required, as well as a copy of their passport, OCI, and PIO cards for NRIs and foreigners.

7. Proof of entitlement. This might be the number of the initial stock/interest warrant application.

8. Cancelled cheque leaf for the IEPF Form-5 bank account.

9. Copy of your demat account’s client master list that has been self-attested.

Step 3: From the company to the authority

Within 15 days of receiving the Claim form, the responsible firm must prepare a verification report and transmit it to the authorities in the appropriate format, along with the claimant’s documentation.

Step 4: Delegation of authority to the claimant

The authority and the Drawing and Disbursing Officer of the authority shall send a bill to the Pay and Accounts Officer for payment based on the guidelines after completing the verification of the claimant’s entitlement.

If the claimant is entitled to the shares, the authority will issue a refund sanction order with the permission of the competent authority. The shares will be credited to the claimant’s demat account or to the extent of the claimant’s entitlement. If the shares are physical certificates, the duplicate certificates are annulled and the shares are handed to the claimant.

The authorities receive the claimant’s reimbursement application, which has been validated by the corporation. The authorities must make a decision within 60 days after obtaining the verification report from the relevant firm.

The ministry is seeking legal change to make it easier for businesses to transfer their stock to the government.

The change, according to authorities, will centralise and streamline the share transfer procedure, as well as address the problem of unclaimed dividends, which now total Rs 2,000 crore. The Ministry of Corporate Affairs (MCA) is pressing for a change to the Firms Act that would allow the government to take over the work of transferring shares from companies. Officials said the change will centralise and streamline the share transfer procedure, as well as address the problem of unclaimed dividends, which total Rs 2,000 crore. According to top ministry officials, the claimant would have to ask the government to transfer shares into his or her name as a result of the revisions to the Companies Act. 

Through this blog, we hope you understand the process of recovery of shares in India with India’s leading legal consultation firm MUDS Management. You can find lost shares via booking consultation with our legal advisors.