The Ministry of Corporate Affairs (MCA) by notification dated 14th August, 2019 has further amended the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (the Rules). The amended provisions of these rules shall come into force from 20th August, 2019 except provisions of rule 6 which shall come into force from 20th September, 2019. Based on the representations made by the stakeholders, MCA has revised the aforesaid Rules with respect to transfer of shares. The revised rules has further made the process of transfer of dividend/shares to and claiming of refund from the Investor Education and Protection Fund (“the Fund”) effortless.

Link to view: IEPF Authority (Accounting, Audit, Transfer and Refund) Second Amendment Rules, 2019

KEY FEATURES OF THE REVISED RULES

Some of the major changes have been brought by the Rules are highlighted below:

RULE 5: STATEMENT TO BE FURNISHED TO THE AUTHORITY

1. Any amount required to be credited by the companies to the Fund as section 125 of the Companies Act, 2013 (“the Act”) shall be remitted online along with a Statement in Form No. IEPF 1 containing details of such transfer to the Authority within a period of thirty days of such amounts becoming due to be credited to the Fund.

The earlier process which required the amount to be remitted into the specified branches of Punjab National Bank along with challans in triplicate has been done away with. This has reduced the complexities involved in crediting the amount to the Fund.

2. A new sub-rule 4A has been added which states that the companies which have transferred any amount pursuant to the provisions of section 205C of the Companies Act, 1956 to Investor Education and Protection Fund or Central Government, but have not filed the statement or have filed the statement in any format other than in excel template, as required, shall submit details mentioned in sub-rule (1) of rule 5 of the Rules in Form No. IEPF – 1A along with excel template within sixty days of notification of the amended rule.

3. The company shall maintain the record filed in Form IEPF-1 in the same format along with all supporting documents and the Authority shall have the powers to inspect such records. Earlier, there was no specified format to maintain records of amount transferred to the Fund.

4. Sub-rule 8 has been substituted namely:

Every company shall within a period of sixty days after the holding of Annual General Meeting or the date on which it should have been held as per the provisions of section 96 of the Act, whichever is earlier and every year thereafter till completion of the seven years period, identify the unclaimed amounts, as referred in subsection (2) of section 125 of the Act, as on the date of closure of financial year the account of which are to be adopted in the Annual General Meeting as per sub-section (1) of section 137 of the Act, separately furnish and upload on its own website and also on website of Authority or any other website as may be specified by the Government, a statement or information of unclaimed and unpaid amounts separately for each of the previous seven financial years through Form No. IEPF-2, 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 due date for transfer into the Investor Education and Protection Fund; and (e) such other information as may be considered necessary.

Earlier, the unclaimed amounts, as referred in subsection (2) of section 125 of the Act, was  identified as on the date of holding of Annual General meeting or the date on which it should have been held as per the provisions of section 96 of the Act.

RULE 6: MANNER OF TRANSFER OF SHARES UNDER SUB-SECTION (6) OF SECTION 124 TO THE FUND

1. While effecting the transfer of shares to the Fund, the company shall send a statement to the Authority in Form No. IEPF-4 within thirty days of the corporate action taken under clause (c) of sub-rule (3) of rule 6 containing details of such transfer and the company shall also attach a copy of the public notice published under clause (a) of sub-rule (3) of rule 6 in Form No IEPF-4.

Earlier, there was no time limit defined in the Rules for sending the statement to the Authority in Form No. IEPF-4 and also there was no requirement to attach copy of public notice published under clause (a) of sub-rule (3) of rule 6 in Form No IEPF-4. By the amended rule, more clarity has been brought of time line for filing Form IEPF-4.

2. The company shall maintain all such statements filed in Form No. IEPF-4 in the same format along with all supporting documents and the Authority shall have the powers to inspect such records.

3. All benefits accruing on shares transferred to the Fund like bonus shares, split, consolidation, fraction shares and the like except right issue shall also be credited to the DEMAT account of the Authority. The company shall send a statement to the Authority in Form No. IEPF-4 within thirty days of the corporate action containing details of such transfer.

Earlier, there was no requirement to send a statement to the Authority in Form No. IEPF-4 in respect of the benefits accruing on shares transferred to the Fund.

RULE 7: REFUND TO CLAIMANTS FROM FUND

1. Upon submission, Form No. IEPF-5 shall be transmitted online to the Nodal Officer of the company for verification of claim. Provided that the claimant after making an application in Form No. IEPF-5 shall send original physical share certificate, original bond, deposit certificate, debenture certificate, as the case may be, along with Indemnity Bond, Advance Receipts, any other document as enumerated in Form No. IEPF-5, duly signed by him, to the Nodal Officer of the concerned company at its registered office for verification of the claim.

The requirement of sending the physical copy of Form No. IEPF-5 by the claimant duly signed by him to the concerned company has been done away with. Now, the Form shall automatically be transmitted online to the Nodal Officer of the company for verification of claim.

2. Every company which is required to credit amounts or shares to the fund or has deposited the amount or transferred the shares to the Fund shall nominate a Nodal Officer, who shall either be a Director or Chief Financial Officer or Company Secretary of the company, for the purposes of verification of claims and coordination with the Authority.

The company may appoint one or more Officer as Deputy Nodal Officer to assist the Nodal Officer for the purposes of verification of claim and for coordination the Authority. The Nodal Officer shall be solely liable for all actions of any officer appointed as Deputy Nodal Officer

In case a company fails to appoint Nodal Officer, every director of the company shall be deemed to be nodal officer and be liable for any failure to comply with requirement of these rules.

This has been a major change brought in by the amended rules. Earlier, any officer or employee of the company was nominated as nodal officer for the purposes of coordination with the Authority. There was no liability upon the directors of the Company in case of non-compliance. By the amended rules, directors of the company have been made more accountable.

3. New sub-rule (2A) has been inserted stating the details of the Nodal Officer and Deputy Nodal Officer duly indicating his or her designation, postal address, telephone and mobile number and company authorized e-mail ID shall be communicated to the Investor Education and Protection Fund Authority in Form No. IEPF – 2 within fifteen days from the date of publication of these rules and the company shall display the name of Nodal Officer and his e-mail ID on its website.

In case of any change in the Nodal Officer or his details shall be communicated to the Authority through Form No. IEPF-2 within seven days of such change along with board resolution thereof.

4. The company shall, within thirty days from the date of receipt of claim, send an online verification report to the Authority after verification of details in Form No. IEPF-5 and shall attach the scanned copy of both sides of all the original documents submitted by the claimant in physical form duly certified by its Nodal Officer along with the e-verification report along with a scanned copy of both sides of original physical share certificate or original bond or deposit or debenture certificate/s duly cancelled and certified.

The verification report is now made available online. This has reduced the time taken for sending the same physically.

5. Where the Authority, on examining any application for claim, finds it necessary to call for further information or finds such application or e-form or document to be defective or incomplete in any respect, the Authority shall give intimation of such information called for or defects or incompleteness, by e-mail on the email address of the claimant and the company.

Previously, the Authority used to physically sent letter calling for information or defects or incompleteness. With the new e-verification procedure, the Authority shall give intimation by   e-mail.

CONCLUSION

To conclude, the new amended rules have removed the hardship created to the companies for claiming the amount or shares transferred to the Fund. It has streamlined the process electronically and had reduced the time and effort taken to claim the refund through physical application. The Schedules added to the Rule clear states the documents to be submitted to the Authority to register transmission of securities and loss of securities held in physical mode. With the introduction of new Form IEPF -1A, the companies which have transferred any amount pursuant to the provisions of section 205C of the Companies Act, 1956 to Investor Education and Protection Fund or Central Government, but have not filed the statement or have filed the statement in any format other than in excel template, as required, shall submit details within sixty days of notification of the amended rule.

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