Transfer of Shares to IEPF Authority- Analysis of recent Circular

The Ministry of Corporate Affairs (hereinafter referred to as “the MCA”) has issued General Circular No. 12/2017 dated 16^th October, 2017 in connection with the second proviso to Rule 6 of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, by virtue of that seven years period as provided u/s 124(5) of the Companies Act, 2013, for unpaid/unclaimed dividends during 7^th September, 2016 to 31^st October, 2017, the due date of transfer of such shares by Companies is 31^st October, 2017.

Brief Procedure for Transfer of Shares to IEPF:

• The shares shall be credited to DEMAT Account of the Authority to be opened by the Authority for the said purpose, within a period of thirty days of such shares becoming due to be transferred to the Fund. As per  General Circular No. 12/2017 dated 16^th October, 2017 due date of transfer of shares for unpaid/unclaimed dividends during 7^th September, 2016 to 31^st October, 2017 is 31^st October, 2017.
• Any beneficial owner who has encashed any dividend warrant during the last seven years, such shares of beneficial owner shall not be required to be transferred to the Fund.

• Such shares required to be transferred to the demat accounts opened by the IEPF Authority with NSDL and CDSL through Punjab National Bank and SBICAP Securities Limited.
• Details of Demat Accounts opened:

• Such shares (Physical/Demat) shall be transferred to the aforesaid Demat account by way of Corporate Action (Necessary disclosures/intimations/compliance required to be made to the stock exchanges etc. for Corporate Action)
• The Company needs to submit information related to the shareholders, whose shares are being transferred to IEPF’s Demat Account to the NSDL or CDSL as per the prescribed format of concerned authority
• Every cash benefit accruing on account of shares transferred to IEPF Account such as Dividend, Proceeds of Delisting, upon winding up, shall be transferred by the Company to Bank Account opened by IEPF Authority with Punjab National Bank, Sansad Marg, New Delhi, which has been linked to Demat accounts mentioned hereinabove
• The amount due to be transferred u/s 125(2) of the Companies Act, 2013 or any other amount to the aforesaid account is strictly prohibited
• For such transfer the Board needs to authorize Company Secretary or any other person to sign required documents
• The Company shall inform, at the latest available address, the shareholder concerned regarding transfer of shares three months before the due date of transfer of shares and also simultaneously publish a notice in the leading newspaper in English and regional language having wide circulation informing the concerned that the names of such shareholders and their folio number or DP ID – Client ID are available on their website duly mentioning the website address.
• For the purposes of effecting the transfer, where the shares are in demat form:
  • the Company shall inform the depository by way of corporate action, where the shareholders have their accounts for transfer in favour of the Authority.
  • on receipt of such intimation, the depository shall effect the transfer of shares in favour of DEMAT account of the Authority.
• For the purposes of effecting the transfer where the shares are held in physical form:
  • the Company Secretary or the person authorised by the Board shall make an application, on behalf of the concerned shareholders, to the company, for issue of duplicate share certificates (here MCA has clarified vide General Circular No. 7/2017 dated 5^th June, 2017 that the transfer of Shares to IEPF is on account of operation of law hence the procedure followed during transmission of shares may be followed and duplicate shares need not to be issued)
  • Share certificate shall contain on face of it that the certificate is “Issued in lieu of Share Certificate No. ….. for the purpose of transfer to IEPF and the word Duplicate shall be punched in bold letters on the first page of the Share Certificate
  • After following procedure of Transmission of shares the Company shall inform the depository by way of Corporate Action to convert such physical shares into Demat form and transfer the same to IEPF Account
• The Company shall make such transfers through Corporate Action and preserve copies of such records
• The Company shall send statement to the Authority in Form IEPF – 4 containing details of such transfers
• Voting Rights on such shares shall be frozen
• The Company shall maintain details of each Shareholders whose shares have been transferred to IEPF Authority
• IEPF (Accounting, Audit, Transfer and Refund ) Second Amendment Rules, 2017 also provides for appointment of Nodal Officer of the Company for co-ordinating with IEPF Authority and intimation thereof to IEPF within 15 days of publication of rules.  Details of Nodal Officer shall also required to be updated at website

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