Investor Education and Protection Fund: Investor Education and Protection Fund is a fund created by Central government of India which includes the amount in the Unpaid Dividend Account of companies transferred to the Fund under subsection (5) of section 124 and the amounts in the general revenue account of the Central Government which had been transferred to that account under sub-section (5) of section 205A of the Companies Act for promotion of investors’ awareness and protection of the interests of investors.
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Procedure to Transfer Unpaid and Unclaimed Dividend to IEPF by Companies:
Section 124 of Companies Act, 2013 states the treatment and procedure of unpaid and unclaimed Dividend and Shares which is as follows:
1. Where a company declares dividend and it is not paid or claimed by any shareholder who is entitled to receive the dividend within thirty days of the declaration date, then the company is required to transfer the entire amount of the dividend that is not paid or claimed to an Unpaid Dividend Account, which it will open in any scheduled bank, within seven days of the thirty-day period ending.
2. After transferring funds to the Unpaid Dividend Account, the company is required to prepare a statement detailing the names, last known addresses, and unpaid dividends for each individual. This statement must be posted on the company’s website, if it has one, as well as any other website that the Central Government has approved for this purpose. Form IEPF-4 is Statement of shares transferred and information of shares & unclaimed or unpaid dividend not transferred to the IEPF.
3. If the company fails to transfer the entire amount mentioned in sub-section (1) or any portion of it to the Unpaid Dividend Account, it shall pay interest at a rate of twelve percent per year on the portion of the amount that has not been transferred to the account. The interest that accrues on this amount shall be distributed to the company’s members in proportion to the amount that is still owed to them.
4. A person who is entitled to claim the transfer money kept in Unpaid Dividend Account in the first instance may apply to the company for payment of the claim amount.
5. Any fund transferred to a company’s Unpaid Dividend Account that are not repaid or claimed after seven years from the date of the transfer will be transferred by the company to the Fund established under sub-section (1) of section 125 named as Investor Education and Protection Fund, together with any interest that may have accrued. The company will send a statement in the prescribed Form i.e. IEPF-1 containing the details of the transfer to the IEPF Authority responsible for managing the Fund, and that authority will provide a receipt to the company as proof of the transfer.
6. Further, all shares of the company on which the dividend has not been paid or claimed for a minimum of seven consecutive years shall be transferred to the Investor Education and Protection Fund. The transfer shall include a statement that includes any prescribed facts required by the IEPF rules.
[Explanation. —In case any dividend is paid or claimed for any year during the said period of seven consecutive years, the share shall not be transferred to Investor Education and Protection Fund.]
7. If any company fails to comply with any of this provisions, such company shall be liable shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees
Where the amount of Unpaid and Unclaimed Dividend is not transferred to IEPF:
Any Shareholder who is entitled for dividend declared by the company which is credited to unpaid dividend Account by the company as per section 124(1) and not yet transferred to IEPF can claim the same from the company as per section 124(4) of companies Act, 2013.
The claimant needs to contact to Registrar and Transfer Agent of the company with a request Letter along with the details of Claimant i.e. Name, Address, DP ID, Client ID and Original Dividend Warrant/Demand Draft in case not available then a Letter of undertaking and should get the bank details (with MICR No. & IFSC of the bank) updated in the Demat account duly authenticated by the depositary participant.
After the Verification of claim Amount of unpaid and Unclaimed Dividend by the Registrar and Transfer Agent, company shall transfer the same amount to the Claimant.
As per Rule 7 (1) of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, the unclaimed dividends that have been transferred to the IEPF can be claimed by submitting an online application in IEPF-5 Form which can be filed after login MCA Portal. The following are the steps to claim the amount:
1. The Claimant need to write a request letter all those companies which has transferred his/her unpaid and unclaimed dividend and shares to IEPF along with KYC Documents, DP ID, Client ID, Demat account statement and other documents required by the company.
2. After the necessary verification, the companies will issue an ‘Entitlement Letter.’ So that claimant can proceed to fill the Form IEPF-5.
3. Now, Visit MCA portal and Login the portal.
4. Go to MCA services<Company e-filings< IEPF services< IEPF-5
5. Fill out the Refund claim form along with KYC documents, Client master List of the Claimant’s Demat Accounts, Proof of entitlement (Bonds/Debentures/Fixed Deposit receipts/Certificate of share/Interest warrant/Dividend warrant, Application No./Statement of transaction etc.)
6. In case the claimant is a Foreigner or NRI, few more documents are required which are passport, Overseas Citizen of India (OCI), and Person of Indian Origin card.
7. After submission a service request number will be generated with an acknowlgement.
8. Now, the claimant need to send the physical Documents to the Nodal Officer of Companies at its registered address for the Verification which are:
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- Copy of Acknowledgment generated on submission of Form IEPF-5 bearing Unique Service Request Number,
- An original copy of the indemnity Bond with Claimant’s Signature and Witnesses,
- Original matured deposit / debenture / share certificate (in case of securities held in physical form) or copy of transaction statement in case of securities held in Demat Form.
- Cancelled Cheque leaf, and
- Other supporting documents attached in IEPF -5.
9. After this the Claimant’s work is done. Now, the company carries the process and send the Verification report to the IEPF Authority within 15 days of the receipt of the claim.
10. IEPF Examine the completeness of documents and Transfer the shares and refund amount through E-mode.
Conclusion: Investor Education and Protection Fund is created for promotion of investors’ awareness and protection of the interests of investors and this process of dealing with the unpaid and unclaimed dividend and shares plays a very important role in the protection of investors’ interest.
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