Analysis of Amendment in Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 vide Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2021
Ministry of Corporate Affairs vide its notification dated 09th June 2021 has amended the provisions of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 to introduce the manner of transfer of shares under section 90(9) of the Companies Act 2013 to the Investor Education and Protection Fund.
First we will obtain basic knowledge about Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 and afterwards its amendments. [IEPFA Rules, 2016]
IEPFA rules is established to administer the Investor Education and Protection Fund (IEPF) constituted under section 125 of the Companies Act, 2013. Amount which are credited to the fund are:-
(a) All amounts payable as mentioned in clause (a) to (n) of section 125(2) of the Companies Act, 2013;
(b) All shares in respect of which dividend has not been paid or claimed for 7 or more years;
(c) All resultant benefits arising out of shares held by the Authority under clause (b);
(d) All grants, fees and charges received by the Authority under these rules;
(e) All sums received by the Authority from such other sources as may be decided upon by the Central Government;
(f) All income earned by the authority in any year;
(fa) Amendment– all the shares held by the IEPFA in accordance with proviso of section 90(9) of the Companies Act, 2013 and all the resultant benefits arising out of such shares, without any restrictions.
(g) All amounts payable as per section 10B(3) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, Section 10B of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, Section 38A(3) of the State Bank of India Act,1955 and section 40A of the State Bank of India (Subsidiary bank) Act, 1959
(h) All other sums of money collected by the Authority as envisaged in the Act.
Accounts and audit
IEPFA has to maintain proper accounts and other relevant records and prepare an annual statement of accounts in such form as may be specified by the Central Government in consultation with the Comptroller and Auditor-General of India.
Statement to be furnished to the Fund
Any amount required to be credited by the companies to the IEPF as provided under clauses (a) to (n) of section 125(2) of the Companies Act, 2013 shall be remitted online along with a Statement in Form No. IEPF 1 within a period of 30 days of such amounts becoming due to be credited to the Fund.
On receipt of the statement, IEPFA shall enter the details of such receipt in a Register maintained physically or electronically by it in respect of each company every year, and reconcile the amount so remitted and collected, with the concerned designated bank on monthly basis. Each designated band shall furnish an abstract of such receipts during the month to IEPFA within 7 days after the close of every month.
Amendment- insertion of Rule 6A
Manner of transfer of shares under section 90(9) of the companies act, 2013 to the Fund
1. Shares shall be credited to DEMAT Account of the IEPFA within 30 days of such shares becoming due to be transferred to the Fund.
Provided that transfer of shares by the companies to the Fund shall be deemed to be transmission of shares and the procedure to be followed for transmission of shares shall be followed by the companies while transferring the shares to the fund.
Provided further that such shares shall be transferred to the IEPFA without any restrictions and no application shall be filed for claiming back of such shares.
2. For the purposes of effecting transfer of such shares, the Board shall authorize the Company Secretary or any other person to sign necessary documents.
3. The company shall follow the following procedure while transferring the shares, namely:-
(A) 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 IEPFA,
(ii) on receipt of such intimation, the depository shall effect the transfer of shares in favour of DEMAT account of the IEPFA;
(B) for the purposes of effecting the transfer of shares held in physical form-
(i) the Company Secretary or the person authorised by the Board shall make an application, on behalf of the concerned shareholder, to the company, for issue of a new share certificate;
(ii) on receipt of the application under clause (a), a new share certificate for each such shareholder shall be issued and it shall be stated on the face of the certificate that “Issued in lieu of share certificate No….. for the purpose of transfer to IEPF under section 90(9) of the Companies Act, 2013” and the same be recorded in the register maintained for the purpose.
(iii) particulars of every share certificate shall be in Form No. SH-1 as specified in the Companies (Share Capital and Debentures) Rules, 2014;
(iv) after issue of a new share certificate, the company shall inform the depository by way of corporate action to convert the share certificates into DEMAT form and transfer in favour of the Authority.
4. The company shall make such transfers through corporate action and shall preserve copies for its records.
5. While effecting such transfer, the company shall send a statement to the IEPFA in Form No. IEPF-4 within 30 days of the corporate action taken under sub-rule (4) of rule 6A containing details of such transfer and the company shall also attach a copy of order of the Tribunal under section 90(8) of the Companies Act,2013 along with a declaration that no application under section 90(9) of the Companies Act, 2013 has been made or is pending before the Tribunal.
6. The voting rights on shares transferred to the Fund shall remain frozen.
7. The company shall maintain all such statements filed under sub – rule (3) in the same format along with all supporting documents and the IEPFA shall have the powers to inspect such records.
8. All benefits accruing on such shares like bonus shares, split, consolidation, fraction shares and the like except right issue shall also be credited to such DEMAT account [by the company which shall send a statement to the IEPFA in Form No. IEPF-4 within 30 days of the corporate action containing details of such transfer.]
9. If the company is getting delisted, the IEPFA shall surrender shares on behalf of the shareholders in accordance with the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 and the proceeds realised shall be credited to the Fund and a separate ledger account shall be maintained for such proceeds.
10. In case the company whose shares or securities are held by the IEPFA is being wound up, the Authority may surrender the securities to receive the amount entitled on behalf of the security holder and credit the amount to the Fund and a separate ledger account shall be maintained for such proceeds.
11. Any further dividend received on such shares shall be credited to the Fund and a separate ledger account shall be maintained for such proceeds.
12. Any amount required to be credited by the companies to the Fund as provided under sub-rules (9), (10) and sub-rule (11) shall be remitted into the specified account of the IEPFA maintained in the Punjab National Bank [and the details thereof shall be furnished to the IEPFA inForm No. IEPF-7 within 30 days from the date of remittance].
13. IEPFA shall furnish its report to the Central Government as and when noncompliance of the rules by companies came to its knowledge.”
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