Process of Transfer of Shares to IEPF & How to Claim back these Shares

What is IEPF and how shares are transferred to this fund?

Let us understand this with an example. Ankit bought 100 shares of Reliance Industries Limited on its first IPO i.e. 1995. Since at that time all the shares were in physical form so he was given shares in the documents form. He eventually loses these share certificates. Later on he remembers that he has bought certain amount of shares of RIL. On enquiring he comes to know that these shares have been transferred to IEPF.

Now the question is why did this happened & what is IEPF?

All the Indian Companies as per Companies Act, 2013 are compulsorily required to transfer unclaimed shares and dividends to a Government Fund called as Investor Education and Protection Fund. Since this fund is laying unutilized so the objective of Government is to make best use of it until someone comes to claim it.

What are the process taken by Companies to Transfer IEPF Fund?

Step 1: A Company declares dividend and issues dividend warrants to physical shares owners but if not claimed within 30 days from the date of the declaration, then the Company is required has to, within 7 days from the date of expiry of the said period of 30 days, transfer the total amount of dividend to a special bank account called as Unpaid Dividend Account.

Step 2: The Company within 90 days of making any transfer of an amount to the Unpaid Dividend Account, prepare a statement containing the names, their last known addresses and submits it to the Government. (IEPF Authority)

Step 3: Any person can at this stage directly apply to the Company for his Unpaid Dividend  for payment of the money claimed and he will get his dividend directly from Unpaid Dividend Account.

Step 4: Any money transferred to the Unpaid Dividend Account of a Company  still remaining unpaid or unclaimed for a period of seven years from such date of transfer shall be transferred by the Company to another special fund created by Government called as Investor Education and Protection Fund (IEPF Fund)

Step 5: All shares in respect of which above dividend is transferred to IEPF shall also be transferred by the Company in the name of Investor Education and Protection Fund.

This is briefly the process which a Company follows to transfer shares to IEPF Authority. IEPF stands for Investor Education and Protection Fund. This has been defined under section 125 of Companies Act, 2013.

Thus it is clear that Government’s is just holding these shares on behalf of the shareholders and they are to be transferred to the person who has a genuine claim for the investment. It is specifically written in the act that the prime use of this fund will be to refund money to the Investors. Until then Government continues to enjoy the fund.

Process for claiming shares from IEPF

1. Obtain an exact valuation of the shares including the shares, bonus shares, dividend on the shares and certify it from the Registrar & Share Transfer Agent (RTA) of the Company.

2. Obtain an Authority Letter from the Company stating that the claimant is alive or his legal heirs are present.

3. On obtaining an authority letter file a Form IEPF-5 on MCA portal.

4. Get the same printed and submit it along with other documents like application form, ID proofs, Address Proofs, Affidavits, Dividend warrants, share certificates, Demat account details, Bank details to the Company.

5. The Company within 30 days from the date of receipt of physical application, submits a verification report to the authority after verification of details in Form IEPF-5 after conducting the necessary enquiry at its level which may include a physical verification.

6. A verification is also conducted at the level of IEPF authority and it may call for further information or documents. Also they can conduct a physical verification

7. After verification of the entitlement of the claimant by the IEPF authority the Drawing and Disbursement Officer of the authority shall make the credit the shares to the DEMAT account of the claimant and disburse the dividend amount to the Bank Account of the Claiment.

Specific points to be taken care of at this stage.

• In case, claimant is not the original shareholder and is either a joint owner or legal heir or successor or administrator or nominee of the registered share holder, then in such a case the claimant has to justify his claim with appropriate documents like probate, will or succession certificate.
• Every Company nominate a Nodal Officer, who is generally a Company Secretary of the Company, for the purposes of verification of claims and coordination with the claimant and Investor Education and Protection Fund Authority:
• The following laws have to be followed for submission of claims otherwise it can be rejected at any stage by the Company or IEPF Authority.
• Companies (Share Capital and Debenture) Rules, 2014,
• Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulation, guidelines, procedures and circulars issued from time to time
• Companies Act, 2013 and other applicable rules and regulations