Process for transfer of unclaimed amount w.r.t Non-Convertible securities lying with Listed Entities and manner of claiming of such amounts by the Investors.

Introduction: SEBI, through its circular dated November 08, 2023, has laid down a standardized process regarding unclaimed amounts associated with Non-Convertible Securities (NCS) held by listed entities (LEs). This framework encompasses the transfer of such amounts to an Escrow Account and subsequently to the Investor Education and Protection Fund (IEPF). The guidelines aim to ensure transparency and efficiency in the handling of unclaimed interest, dividends, and redemption amounts.

Background: 

Regulation 61A of the SEBI (Listing Obligations Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”) mandates that where the interest/dividend/redemption amount has not been claimed within 30 days from the due date of such payment, a Listed Entity (“LE”) shall within 7 days from the date of expiry of the said period of 30 days, transfer the amount to an Escrow Account. Further, Regulation 61A (3) of the SEBI Listing Regulations provides any amount remaining unclaimed and lying in Escrow Account shall be transferred to:

a. In case of LE which are Companies- the ‘Investor Education and Protection Fund’ (IEPF) constituted in terms of section 125 of the Companies Act, 2013.

b. In case of LE which are not Companies- the ‘Investor Education and Protection Fund’ (IEPF) created by SEBI.

In this regard SEBI vide Circular dated November 08, 2023 has framed standardised process for:

i. The LE for transfer of unclaimed amount as mentioned above w.r.t Non-Convertible Securities (NCS)1 to Escrow Account and

ii. The investors for making claims thereof.

1As per SEBI (Issue and listing of Non- Convertible Securities) Regulations, 2021, Non-Convertible Securities” means debt securities, non-convertible redeemable preference shares, perpetual non-cumulative preference shares, perpetual debt instruments and any other securities as specified by the Board.

Applicability of Circular:

LE with listed NCS and having unclaimed interest/dividend/redemption amount for more than 30 days from the due date of such payment.

Timeline for applicability of Circular:

The aforesaid Circular shall be effective from March 1, 2024.

Framework for transfer of unclaimed amounts by the LE to Escrow Accounts and claim thereof by Investors

Responsibilities of LE

Particulars Obligations of LE
Transfer of unclaimed amounts to Escrow Account and interest in case default LE shall open an Escrow Account with any scheduled Bank and shall within 7 days from date of expiry of 30 days shall transfer the unclaimed amounts in such Escrow Account.

In case of default, the LE shall pay interest on the amount that has not been transferred to the said account, for the period of default i.e. from the date of default till the date of transfer to the Escrow Account at the rate of 12% per annum.

Interest amount shall accrue to the Investors proportionately.

Nodal Officers LE shall designate Director, Chief Financial Officer, Company Secretary or Compliance Officer as Nodal officer, who shall be the point of contact for investors entitled to claim their unclaimed amounts, SEBI, Stock Exchange(s) and Depositories.

Further within 15 days of change in Nodal officer, LE shall designate another person as Nodal officer.

Website compliances Details of Nodal Officer

Details of Nodal Officer consisting of name, designation, email and phone no. shall be displayed on the website of the LE.

Details of unclaimed amounts

Further, within 30 days of transferring the unclaimed amount to the Escrow Account, following details shall be uploaded on the website:

ISIN Amount lying un-claimed Category (Interest/ Dividend/ Redem-ption amount) No. of investors Date when amount became due Date when un-claimed amount was trans-ferred to Escrow Account

 

Date when amount is to be transf-erred to IPEF

Search facility for Investors

The website of LE shall have search facility for investors to verify if there is any unclaimed amount due to them and lying in the Escrow Account.

Following information shall be made available to the investor upon search:

1. Amount due to the investor and date when amount became due;

2. Category -interest/ dividend/ redemption amount;

3. Amount transferred to Escrow Account (including penalty interest in case of delay in transfer, if any). In case of delay, proportionate interest accrued to the investors may also be disclosed.

4. Date when unclaimed amount was transferred to Escrow Account.

The LE shall also display the cumulative details of the number of claims received, processed, pending, etc. on its website.

Policy for filing of claim –

Detail of which is enumerated below.

Further, any change in the information uploaded on the website shall be updated by the listed entity by the 7th day of the succeeding month.

Policy specifying process to be followed by investors for claiming their unclaimed amounts.

 

LE shall formulate a policy specifying process to be followed by investors for claiming their unclaimed amounts including following details:

a. the format and manner of submission of claim by the investor.

b. the procedure and documentation for making claim along with documents required in support of claim.

c. timeline within which the investor can submit documents, provide clarifications along with timeline within which the claim shall be processed by the LE.

d. conditions for rejection of claim and option of re-filing of a claim by the investor.

e. contact details (email ID and phone number) wherein investor can raise their queries or grievances, if any, relating to their claim.

Processing of claim by the listed entity.

LE shall formulate a policy for identifying the process to be followed for verification of claim submitted by the investor including documents to be taken into account, facility to check status of claim by investor.

If the LE, upon receipt of claim applications finds the documents to be defective or incomplete or wants any further information, it shall intimate the investor by e-mail or written communication for furnishing such information within 30 days from receipt of such communication, failing which, it may reject the application. However, rejection of claim does not debar investor from filing a fresh claim.

The LE shall within 30 days of receipt of a claim application from an investor or complete information as called upon from the investor, remit the payment to the investor using electronic modes of funds transfer.

Procedure applicable to Investors

Any investor or legal heir/ successor/ nominee2 of the investor claiming to be entitled to any unclaimed amount lying with the LE may apply to the LE for payment of such amount, in the format and manner as prescribed by the LE.

2The legal heir/ successor/ nominee shall satisfy the provisions specified under the SEBI Listing Regulations and circulars issued thereunder, for the transmission of non-convertible securities and/ or the corresponding claim thereon, as applicable.

Further, LE having unclaimed amounts in the Escrow Account for less than 7 years, as on February 29, 2024, shall start computing interest, as per provisions of Annex -A as mentioned in the Circular, from March 1, 2024.

Framework for transfer of unclaimed amounts from the Escrow Account of the LE (which are not Companies) to IPEF and claim thereof by the investors.

Applicability

Entities which are not companies per Companies Act, 2013 and have listed NCS in respect of which there is interest/ dividend/ redemption amount lying unclaimed in the Escrow Account for seven years.

Responsibilities of LE

Particulars Obligations of LE which are not Companies
Transfer of unclaimed amounts to IEPF Any amount transferred by the LE in Escrow Account and which remains unpaid or unclaimed for 7 years from the due date of such transfer, in such case LE shall endeavor to transfer such amount along with interest accrued within 30 days of expiry of 7 years to IEPF.

Manner of such transfer is detailed out in SEBI Circular dated September 4, 2023, as amended time to time.

Interest in case of default

In case, a default is made in transferring the amount referred above or part thereof to the IPEF, the LE shall be liable to a penalty of 1 lakh rupees and in case of continuing failure, a further penalty of 500 rupees for each day that the failure continues, subject to a maximum of 10 lakh rupees.

Any penalty amount so transferred to the IPEF shall be utilised for the purposes described under Regulations 5(1) and 5 (2) of the IPEF Regulations

Information to be submitted along with fund transfer. The LE shall provide information about the unclaimed amount transferred to the IPEF, as per prescribed format (enclosed as Form -A to this Circular), in hard copy, addressed to ‘Chief General Manager, Office of Investor Assistance and Education, SEBI’, as well as in soft copy via email to ipef@sebi.gov.in
Website compliances Further, within 30 days of transferring the unclaimed amount to the IEPF, following details shall be uploaded on the website:

ISIN Amount lying un-claimed in Escrow Account as at end of seven years (in INR)

 

Category

(Interest/

Dividend/

Rede-mption

amount)

No.
of
investors
Date when amount became due for transfer to IPEF (dd/ mm/ yyyy) Date when un-claimed amount was trans-ferred to IEPF

(dd/

mm/

yyyy)

 

Amount transf-erred to IPEF (in INR)

 

Search facility for Investors

The website of LE shall have search facility for investors.

Following information shall be made available to the investor upon search:

1. Amount lying unclaimed in the Escrow Account of the LE as at end of 7 years and Date when amount became due for transfer to IPEF.

2. Break-up of Interest/ Dividend/ Redemption amount.

3. Amount transferred to IEPF by the LE.

4. Date when unclaimed amount was transferred to the IEPF by the LE.

Application for refund by the listed entity to the IPEF In terms of Regulation 5(3)(ii) of the IPEF Regulations, a LE shall after processing an application from an investor for unclaimed amount, make an application to IPEF for refund of such amount.

The application has to be submitted by the LE for reimbursement of the amount transferred by it to the investor, as per prescribed format (enclosed as Form –B to this Circular) in hard copy, addressed to ‘Chief General Manager, Office of Investor Assistance and Education, SEBI’, as well as in soft copy, via email to ipef@sebi.gov.in.

Indemnity The amount refunded from IPEF to the LE for the unclaimed amount paid by the LE to the investor, shall discharge the Board against any future claim of such investor.
Others The provisions with regard to Designating Nodal Officer, Search facility for an investor on the website of the LE, Policy for filing of claim by an investor and Processing of claim of an investor by the LE, Maintenance of records and Update of information by the LE, as prescribed in Annex -A to this circular, shall apply, mutatis mutandis, at the stage of transfer of funds from the Escrow Account to IPEF, as well.

Procedures applicable to investors

Any investor or legal heir/ successor/ nominee of the investor claiming to be entitled to any unclaimed amount transferred to the IPEF by the LE may apply to the LE for payment of such amount, in the format and manner as prescribed by the LE.

The circular also provides process for refund of claim of the LE from IPEF.

Further, for LEs which are not companies and have unclaimed amounts in the Escrow Account for more than 7 years, as on February 29, 2024, shall transfer the unclaimed amounts of the investors to IPEF, in compliance with the provisions of as mentioned in the Annex -B as mentioned in the Circular, on or before March 31, 2024.

Conclusion: SEBI’s guidelines aim to streamline the process of handling unclaimed amounts related to NCS, ensuring timely transfers, transparent information dissemination, and easy access for investors to claim their dues. It establishes a robust framework for LEs to follow, emphasizing accountability and investor protection.

Relevant SEBI Circulars:

SEBI | Procedural framework for dealing with unclaimed amounts lying with entities having listed non-convertible securities and manner of claiming such amounts by investors

SEBI | Securities and Exchange Board of India (Investor Protection and Education Fund) Regulations, 2009 [Last amended on October 23, 2023]

SEBI | Change in mode of payment w.r.t. SEBI Investor Protection and Education Fund Bank A/c

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