All about Investor Education & Protection Fund

CS Kiran Mukadam

The Preamble of the SEBI describes the basic functions is to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto. The SEBI only act as market regulator and control the irregular market practices. The SEBI is not in position to guide, to increase awareness among the investors. Therefore the central government has established a fund to be called Investor Education and Protection Fund [IEPF] vide publishing the Notification No. 749(E), dated 1-10-2001 under Companies Act 1956 in the official gazette.

Administration:

The Central Government has specified a committee with such members for administration of the fund. Pursuant to Section 205C (4) read with Rule 7 of the IEPF Rules 2001, the Central Government has constituted a Committee vide Notification No. S.O. 539(E) dated 25.02.2009. The Secretary, Ministry of Corporate Affairs is the Chairman of the Committee. The members are representatives of Reserve Bank of India, Securities Exchange Board of India and experts from the field of investors’ education and protection. The non-official members of the Committee hold office for a period of two years. The official members hold office for a period of two years or until they occupy their position, whichever is earlier. The committee has an authority under sub section 4 to spend money out of the fund for carrying the object which the fund has been established. The Registrar of Companies have an duty to furnish as abstract of receipts and shall reconcile them the amount so remitted and collected with concern pay and account officer. MCA maintain a consolidated abstract of receipt and shall reconcile with principal pay and account officer of MCA. The following amounts shall be part of IEPF, if they remain unpaid for a period of seven years from the date of declaration except point (f) and (g)

a)  amounts in the unpaid dividend accounts of companies;

b)  the application moneys received by companies for allotment of any securities and due for refund;

c)   matured deposits with companies;

d)  matured debentures with companies;

e)  the interest accrued on the amounts referred to in clauses (a) to (d);

f)   grants and donations given to the Fund by the Central Government, State Governments, companies  or any other institutions for the purposes of the Fund; and

g)  the interest or other income received out of the investments made from the Fund

As per secretarial standard 3 of ICSI, the company should give individual intimation to the members in respect of whose unclaimed amount being transfer at least six month before due date amount.  Also, the Company should be mentioned amount unpaid and proposed date of transfer to IEPF in annual report of the Company.

Function of the committee:-

1)  To recommend the Investor Education and Protection activities like seminars, symposium, proposal for registration of voluntary association or institution engaged in Investor Education and Protection projects.

2)  Proposals for registration of Voluntary Associations or Institution or other Organizations engaged in Investor Education and Protection activities;

3)  Proposals for projects for Investors’ Education and Protection including research activities and proposals for financing such projects;

4)  Co-ordination with institution engaged in Investor Education and awareness and profession activities.

5)  To appoint one or more sub committee for functioning of fund in good manner

6)  To furnish report to central government at end of each six months. —

Registration:

The committee may register from time to time various association or organization engaged in activities relating to Investor Education, Protection and proposing for investor programme, seminars, undertaking projects for investors interactions including research.

1)  Any voluntary organization or association engaged in the activities relating to investors awareness, education and protection and proposing investors programmes, organizing seminars; symposium and undertaking projects for investor protection including research activities can register itself under IEPF through form 3

2)  The committee finance upto five of total budget of Investor Education and Protection Fund subject to maximum 80%

3)  The entity may register in Society Registration Act, Trust Act or Companies Act 1956.

4)  For proposal, it is required two years experienced organization have a minimum 20 member and a proven record of at least two years.

5)  No profit making entity shall eligible for registration for the purpose of financial assistance.

6)  The committee considered audited account, annual report for last three years of entity seeking assistance.

Guidelines for funding of research proposals 

The registered association files an application for funding of research projects.

• A 2000-word outline of the research program that is being proposed indicating therein also a rationale of why the same fits in with the goals of IEPF
• Detailed resume of all the researchers who shall be associated with the project.
• Three best recent published/unpublished papers of the researchers.
• Letters of commitment by researchers promising that they will put in at least 50% of their time for the proposed project from the stated starting date to the stated ending date.

Procedure for financial assistance

• Entities that fulfill the criteria/guidelines for the purpose of financial assistance from IEPF may apply to the IEPF for such assistance in Form 4.
• The feasibility of the project, quantum of financial assistance, genuineness of the organization, etc. is then evaluated by the Sub Committee of IEPF in its meetings held in regular intervals
• After the Sub -Committee approves the proposal, IEPF issues the financial sanction with the approval of Internal Finance Wing of the Ministry of Corporate Affairs.
• The amount is then released to the organization, but only after it submits a pre-defined Bond and a pre-receipt to IEPF.
• After the project is completed, the organization is required to submit the funds utilization certificate and copies of the bills etc. to IEPF for scrutiny.

How to transfer the Unpaid Amount to IEPF under section 205C-

1)  Login To MCA Portal

2)  Select the option “Pay  Miscellaneous fee”

3)  Select the option “Pay fee for Investor Education and Protection Fund”

4)  Fill the CIN number, Company Name, Particulars of Payment and Amount and make the payment

5)  After making the payment, file the form 1 Statement of amounts credited to investor education and protection fund through MCA portal

Investor Education and Protection Fund (Uploading of Information regarding unpaid and unclaimed amount Lying with Companies) Rules 2012-

The Ministry of Corporate affairs have published the above mentioned rule for intimation of unclaimed amount and proposed date of transfer to IEPF of such amount. Every year, the Company including NBFC file the information regarding unclaimed amount as referred to section 205C (2) of the Companies act 1956 through form 5 INV, within 90 days from date of annual general meeting The information contains name and last known addresses of the persons entitled to receive the sum, nature of amount, amount to which each person is entitled, due date transfer to IEPF etc. The form shall be certified by practicing professional like CA, CS, and CMA. As per circular of MCA, every company only file one form and upload the details of investors in excel template. For example, If the unpaid amount u/s 205C contains for the FY 2008-09 to 2010-11, then the company file all the information for all three years through one form and one or multiple excel templates. The cut off date for information is AGM date. For ex. If the Company holds AGM on 30^th September 2012, then the company files the updated unclaimed amount upto date of AGM. The Company also files the same data for the financial year 2010-11. The MCA circular dated 23^rd July 2012 clarified that the companies will have to file Form 5 INV for the year 2010-11 within 90 days from the date of Annual general meeting or 31^st August whichever is later. Indirectly, the circular suggests that 31^st August 2012 will be last date for the companies whose Annual General Meeting held on 30^th September or before that. 

How to upload the form 5 INV and it’s excel sheet-

1)  Prepare the form 5 INV and file through the login ID on MCA portal

2)  After the Form 5- INV is filled and uploaded on the IEPF portal, you are required to provide the investor wise details of unclaimed and unpaid amount.
Following are the steps which need to be followed to upload the investor wise details of unclaimed and unpaid amounts:

1. Install the Pre-requisite Software’s to proceed.
2. Download the Excel toolkit
3. Download the excel template from the IEPF portal in the zip format
4. Unzip the zip file and save the template in xls (97-2003)/ .xlsm(2007) format only
5. Fill the required details in the excel file. The excel template is having three worksheets

ReadMe – Worksheet having instructions to fill the investor details. The users should go through these instructions before filling the investor details so that minimal errors are occurred.

         Investor Details – Worksheet in which users have to enter the details of unclaimed and unpaid amounts.

          Error – Worksheet in which errors shall be displayed upon click of Validate button in Investor Details,

The user is required to enable the Macros in downloaded excel template so that offline validations can be performed through the Validate button. It is important that you Enable Macro using following instructions:

• Excel 2003: Tools–>Macro–>Security–>Select ‘Low’–>OK
• Excel 2007: Office Button–>Excel Options–>Trust Center–>Trust Center Settings—>Macro Settings–>Enable all Macros–>OK.

Please Note: Close the Excel Sheet and re-open it after enabling Macro to start.

For all other excel types please use the help functionality of the Excel. Once the entire investor details are entered or copied, the user is required to press the Validate button for the below mentioned offline validations:

• Investor First Name -> Mandatory if Last Name is blank and Length should be less or equal to 35 characters.
• Investor Middle Name -> Length should be less or equal to 35 characters.
• Investor Last Name -> Mandatory if First Name is blank and Length should be less or equal to 35 characters.
• Father/Husband First Name -> Mandatory if Father/Husband Last Name is blank and Length should be less or equal to 35 characters.
• Father/Husband Second Name -> Length should be less or equal to 35 characters.
• Father/Husband Last Name -> Mandatory if Father/Husband First Name is blank and Length should be less or equal to 35 characters
• Address -> Mandatory and Length should be less or equal to 300 characters
• Country -> Mandatory and List of all countries shall be there. If the Country is other than INDIA state will be “NA”.
• State -> Mandatory and If the Country is “INDIA”, the state should Indian state
• District -> If the Country is “INDIA”, the district should be Indian districts corresponding to the state selected in dropdown.
• Pin code -> Mandatory and Length should be less or equal to 35 characters.
• Folio Number -> Mandatory and Length should be equal to 20 characters.
• Investment Type -> Mandatory and Length should be less or equal to 35 characters.

The errors identified shall be displayed in the ‘Error’ worksheet. Once all the listed errors are removed, the user shall save the updated excel sheet.

3)  Filled in excel file needs to be uploaded on the IEPF portal within 14 days of upload of e-Form 5-INV.

4)  For Uploading the excel file on IEPF portal. The path for the same is as follows:

MCA Portal >> Investor Services >> IEPF >> IEPF Application >> Upload Investor Details.  Enter the User ID, Password (provided in challan of eForm 5-INV) along with SRN of Form 5-INV and CIN. Please ensure that the details entered are correct. After the details are validated, upload the excel file containing investor-wise details of unclaimed and unpaid amounts.

5)  Ensure that the correct details are uploaded on the IEPF portal as an excel file once uploaded cannot be deleted. To modify the details, the excel file with the same file name shall have to be uploaded which shall replace the earlier file.

6)  In case no excel file is uploaded within the prescribed time limit, the filing of Form 5-INV shall be treated as Defective and the form shall be rejected.

7)  Once the excel file(s) has been uploaded, user is required to confirm the upload of the same on the IEPF portal within 15 days of upload of the e-Form 5-INV.  Path for the same is as follows: MCA Portal >> Investor Services >> IEPF >> IEPF Application >> Confirm Uploaded Files. In case uploaded excel files are not confirmed within the aforesaid time period, then the same will be automatically confirmed by the system. The filing of Form 5-INV shall be treated as complete only after the excel file(s) are uploaded and confirmed.

8)  In case the form has been marked as defective, its filing shall be cancelled and shall stand rejected. You will have to file the Form 5- INV again on the IEPF portal. Thereafter you shall be required to upload the excel files again and confirm the same.

9)  A search facility is provided for the investors to search for unclaimed and unpaid amount standing to the investor’s credit. The following are the steps to be followed for searching the amount. The path for the same is as follows: MCA Portal >> Investor Services >> IEPF >> IEPF Application >> Search Unclaimed/Unpaid Amount

10) In case you have not downloaded the Excel toolkit this error gets displayed. It is mandatory to download the Excel Toolkit before filling the investor-wise details in the Excel. Please click the following link to download the Excel Toolkit.

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