Know How to Claim Unclaimed Dividend from Company

The Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, were published on September 5th by the Ministry of Corporate Affairs (MCA). All Companies shall identify and disclose the Unclaimed Dividend as defined in this Rule. Both the transfer and the reimbursement of such Dividends are covered by this rule. This article will explain what these Dividends are and how to submit an IEPF claim for them.

Meaning of Unclaimed Dividend

A dividend is a portion of a company’s profits that are given to each shareholder. The Board of Directors determines and declares the quantity and quality of dividends. A dividend can be final or interim; the former is announced at the conclusion of the fiscal year, while the latter is announced on a quarterly or semi-annual basis. Dividends are paid on a set day; if they are not paid by the payout date, they are referred to as Unpaid Dividends.

Unclaimed Dividends are dividends that have been paid by the corporation to a shareholder but have not yet been claimed or accepted. It is a liability for the firm and is paid by it when requested.

Difference between Unpaid and Unclaimed Dividends

Unpaid dividends are distinct from unclaimed dividends. When a shareholder fails to claim their paid dividends, unclaimed dividends are recorded. If a corporation pays dividends to its shareholders, they should claim the paid dividends. Unpaid dividends are dividends that a firm fails to disburse to shareholders after having declared them. Within 30 days after their declaration, such dividends must be claimed by shareholders. These dividends are stored in a separate account designated for unpaid dividends.

Prior to 2000, dividends were only distributed by check or dividend warrants. The majority of payouts go unclaimed for a variety of reasons, including address changes, typos, etc. Dividends that have not been claimed for more than seven years are sent to the Investor Education and Protection Fund account by the corporation. Furthermore, a shareholder has the ability to request such dividends from the IEPF at any time.

INTRODUCTION

The Investor Education and Protection Fund, or IEPF, was established to advance investor knowledge and safeguard their interests. These things are done using it:

1. Unclaimed profits, debentures that have matured, deposits that have matured, application money that is due for a refund, and interest are all refunded.

2. Promotion of investor awareness, protection, and education

3. Distribution of the disgorged funds to shareholders, holders of debentures, depositors who have experienced losses as a result of any other person, and applicants for shares or debentures who are eligible and identified

4. reimbursement by members, holders of debentures, or depositors of all legal costs spent in prosecuting the class action lawsuit under Sections 245 and 37, as permitted by Tribunal

IEPF

The Government of India formed the Investor Education and Protection Fund Authority on September 7, 2016, in accordance with Section 125 of the Companies Act, 2013, to manage the Investor Education and Protection Fund (IEPF).

The Authority is responsible for distributing shares, unclaimed dividends, matured deposits or debentures, etc., to investors as well as raising investor awareness in addition to managing the Investor Education Protection Fund (IEPF).

After seven years have passed, any such dividends that were transferred to the Investor Education and Protection Fund Authority must be retrieved by the investors with the assistance of a professional.

How to Transfer Unclaimed Dividends to IEPF 

Amounts transferred to the Investor Education & Protection Fund (IEPF) that have been overpaid or unclaimed for more than seven years are also transferred with the accumulated interest. The firm notifies the IEPF Authority of these transfers in a Form IEPF-1 statement. The Authority then manages the aforementioned Fund and provides the corporation with a receipt as proof of the transfer.

Rules 7 points pertaining to recovering Unclaimed Dividends

The following are key elements under Rule 7 regarding the recovery of such dividends:

• By submitting an application in Form IEPF 5 and the required fee, any individual whose unclaimed Dividend and shares were transferred to the Investor Education and Protection Fund (IEPF) may get them from the IEPF Authority. The Authority occasionally decides the charge after consulting with the Central Government.
• After submitting such an application in Form IEPF 5, the claimant delivers it to the relevant business, duly signing it and attaching all the necessary supporting documentation. The application is forwarded to the concerned company’s registration office for the purpose of verifying all of the claimant’s assertions.
• Within fifteen days after the day claims are received, the company delivers a verification report to the IEPF Authority in a manner that the Authority itself determines. The claimant’s documents are provided to the corporation together with this verification report.
• Following a thorough examination of the claimant’s eligibility, the Authority takes the appropriate action as described below:
• When an amount is claimed, the Authority’s Drawing and Disbursing Officer submits a bill to the Pay and Account Office for payment in accordance with the instructions given.
• When shares are claimed, the Authority, with the Competent Authority’s agreement, issues a reimbursement sanction order and credits the shares to the claimant’s DEMAT Account to the amount of the claimant’s right.

The Authorities then register all of the payments paid in its documents.

• The Authority decides on requests for recovery of such dividends under this Rule 7 that the concerned company properly verifies within sixty days of the date of receipt of the verification report from the concerned firm. Any delay that lasts more than sixty days is noted in writing with detailed justifications, and the claimant is then informed of it either in writing or electronically.
• The Authority will notify the claimant and the relevant firm of any shortcomings in the application if it is determined that the claimant’s application is incomplete or unapproved.
• If the applicant is a legitimate heir, successor, administrator, or nominee of any registered shareholder, he or she must check that the application’s transmission procedure has been completed by the relevant business before beginning to file it.
• In a financial year, the claimant only submits one consolidated claim for a corporation.
• In all cases, the company is responsible for holding the Authority harmless in the event that a dispute or lawsuit is brought about as a result of any discrepancy or inconsistency in the verification report. The Authority is not responsible for holding the shareholder or company harmless in the event that such a discrepancy results in litigation or complaint.

Documentation needed for unclaimed dividend recovery

The following are the necessary documentation needed to recover claims from the Investor Education and Protection Fund:

• A copy of the properly completed Form IEPF 5 and an acknowledgment with a special Service Request Number (SRN)
• Indemnity Bond bearing the claimant’s signature A stamped advance receipt bearing the claimant’s and witnesses’ signatures
• When holding securities in tangible form, a debenture, deposit, or share certificate that has reached its original maturity
• a copy of the transaction statement if the securities are kept in DEMAT form
• self-attested copy of Aadhaar Card Poof of entitlement, such as a share certificate or an application number for an interest warrant, etc.
• Returned check
• If the applicant is an NRI, you will need a copy of your passport, proof that you are an Indian national, and 

The process for obtaining unclaimed profits from the IEPF

The procedure is as follows for requesting such dividends from IEPF:

• The claimant submits IEPF Form 5 to the Ministry of Corporate Affairs.
• The claimant then delivers Form 5 and the supporting paperwork to the relevant company’s Nodal Officer at the registered office in an envelope marked “Claim for a refund from IEPF Authority.”
• The relevant firm validates Form 5 after receiving it and provides a verification report to the IEPF Authority.
• The documentation and money transfers from the business to the IEPF Authority are scrutinised by the IEPF Authority.
• The Authority then issues a reimbursement to the claimant. The claimant’s bank account connected to his Aadhar Card receives the release of the Fund.

Conclusion 

Unclaimed dividends are dividends that have been paid by the corporation to a shareholder but have not been claimed by that shareholder. Dividends are transferred to IEPF if stockholders do not claim them within seven years. The shareholder can then submit a claim to the IEPF Authority for such dividends. According to Rule 7 of the 2016 Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, there is a defined mechanism for recovering or refunding such dividends.