Transfer of Unclaimed shares to Investor Education and protection fund (IEPF) (if condition fulfilled)

(A) Manner of Dealing with Unclaimed Shares

(Regulation 39(4) read with Schedule VI of SEBI (LODR) Regulations, 2015)

The listed entity shall comply with the following procedure while dealing with securities which remain unclaimed and/or are lying in the escrow account.

(a) Reminders to Share holders and what to do if response is not received after reminder:

S.no. Shares held in the form of Reminder (at least 3 ) Non receipts of Response after Reminder
1 Physical Reminders shall be sent to the address given in the application form as well as last available address as per listed entity’s record. The listed entity shall transfer all the shares into one folio in the name of “Unclaimed Suspense Account” and shall dematerialise the shares held in the Unclaimed Suspense Account with one of the Depository Participants.
2 Demat Reminders shall be sent to the address captured in depository’s database or address given in the application form, in case of application made in physical form. Unclaimed shares shall be credited to a “demat suspense account” with one of the Depository Participants, opened by the listed entity for this purpose.

(b) The listed entity shall maintain details of shareholding of each individual allottee whose shares are credited to such demat suspense account or unclaimed suspense account, as applicable.

(c) The demat suspense account or unclaimed suspense account, as applicable shall be held by the listed entity purely on behalf of the allottees who are entitled to the shares and the shares held in such suspense account shall not be transferred in any manner whatsoever except for the purpose of allotting the shares to the allottee as and when he/she approaches the listed entity.

(d)As per section 124(6) of companies Act, 2013, all such shares, in respect of which unpaid or unclaimed dividend has been transferred to Investor Education and Protection Fund (IEPF) under Section 124 (5) of the Companies Act, 2013, shall be transferred in this fund. Procedure of transfer of such shares in to IEPF fund is given in Rule 6 of Companies Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.

(Note: Under the erstwhile Act, there was no requirement to transfer the shares for which the dividend is unpaid or unclaimed to the IEPF. However, with the enforcement of the corresponding section, i.e. 124 (6) under the Act, 2013, every Company is mandatorily required to transfer the underlying shares for which the dividend has remained unpaid or unclaimed for a consecutive period of seven years.)

(e) Any corporate benefits in terms of securities accruing on such shares viz. bonus shares, split etc., shall also be credited to such demat suspense account or unclaimed suspense account, as applicable for a period of seven years and thereafter shall be transferred by the listed entity as specified in point no d above.

(B) Manner of transfer of shares under sub-section (6) of section 124 to the IEPF

(Rule-6 of Companies Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016)

(1) The shares shall be credited to DEMAT Account of the IEPF Authority (the authority), within a period of thirty days of such shares becoming due to be transferred to the Fund:

Provided that, in case the beneficial owner has encashed any dividend warrant or any dividend amount has been credited to bank account of the owner of such shares during the last seven years, such shares shall not be required to be transferred to the Fund even though some dividend warrants may not have been encashed:

Provided further 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.

(2) For the purposes of effecting transfer of such shares, the Board shall authorise the Company Secretary or any other person to sign the necessary documents.

(3) The company shall follow the following procedure while transferring the shares, namely:-

(a) 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.

(b) In case, where there is a specific order of Court or Tribunal or statutory Authority restraining any transfer of such shares and payment of dividend or where such shares are pledged or hypothecated under the provisions of the Depositories Act, 1996 or shares already been transferred under point (1) above, the company shall not transfer such shares to the Fund:

Provided that the company shall furnish details of such shares and unpaid dividend to the Authority in Form No. IEPF 3 within thirty days from the end of financial year.

(c) 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 Authority.

(ii) On receipt of such intimation, the depository shall effect the transfer of shares in favour of DEMAT account of the Authority.

(d) For the purposes of effecting the transfer 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 (i), 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” 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 Authority in Form No. IEPF-4 within thirty days of the corporate action taken under clause (c) of point no (3) containing details of such transfer and the company shall also attach a copy of the public notice published under clause (a) of point no (3) above in Form No IEPF-4.

(6) The voting rights on shares transferred to the Fund shall remain frozen until the rightful owner claims the shares.

(7) The company shall maintain all such statements filed under sub – point no (5) in the same format along with all supporting documents and the Authority 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 Authority in Form No. IEPF-4 within thirty days of the corporate action containing details of such transfer.

(9) The shares held in such DEMAT account shall not be transferred or dealt with in any manner whatsoever except for the purposes of transferring the shares back to the claimant as and when he approaches the Authority or in accordance with point no 10 and 11.

(10) If the company is getting delisted, the Authority 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.

(11) In case the company whose shares or securities are held by the Authority 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.

(12) Any further dividend received on such shares shall be credited to the Fund and a separate ledger account shall be maintained for such proceeds”.

(13) Any amount required to be credited by the companies to the Fund as provided under point no 10, 11 and 12 shall be remitted into the specified account of the IEPF Authority maintained in the Punjab National Bank.

(14) Authority shall furnish its report to the Central Government as and when noncompliance of the rules by companies came to its knowledge.

(C) Refund of Shares from IEPF to claimants

Any claimant of shares transferred above shall be entitled to claim the transfer of shares from Investor Education and Protection Fund in accordance with such procedure and on submission of such documents as prescribed under Rule-7 of Companies Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.

(The views expressed herein are personal views of the Author. The views expressed herein in not intended and shall not be taken as, legal advice. For any further queries, the author can be reached at following Email id: caankit02@gmail.com)

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