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.
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.
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.
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
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.
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.
The following are key elements under Rule 7 regarding the recovery of such dividends:
The Authorities then register all of the payments paid in its documents.
The following are the necessary documentation needed to recover claims from the Investor Education and Protection Fund:
The procedure is as follows for requesting such dividends from IEPF:
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.