Many a time it is observed that several shares in any company remain unclaimed or unpaid for a long period. The reasons could vary, however. Sometimes people are not aware of the shareholding, or they could have forgotten the shares, or even the shareholders have expired. Sometime before, the shareholding person has no clue about claiming such shares and in many cases, they would have been transferred to Investor Education and Protection Fund (IEPF). But before proceeding towards the process of claiming the unpaid or unclaimed dividend and shares, we should know what IEPF is.
Considering the problems regarding the claiming of unclaimed and old shares, the Ministry of Corporate Affairs(MCA), Government of India, has introduced an authoritative body of Investor Education and Protection Fund (IEPF) under section 125 of Company Laws, 2013. This body has the responsibility of educating people about the refunds and administration of unclaimed dividends and helping them to make the process easier. The IEPF also ensures the transfer or claim of the transferred IEPF unclaimed dividend to the right person.
However, there are other roles and responsibilities of the IEPF also.
Causes of Unclaimed Dividend Being Transferred to IEPF
According to Section 124 of the Companies Act, 2013, any shares or dividends of a company, if remained unpaid or unclaimed for more than seven years, then it should be transferred to the authority of IEPF by the company. The company has to submit the details of the share and the shareholder to the IEPF website so that it can help the authorized shareholder to reclaim the shares without much hassle.
Reasons for Unclaimed Shares
Before the digitization of the shares and debentures transactions, the investment process used to be in physical form. A physical copy of the certificates of the shares was issued but to keep the hardcopy of the certificates is a troublesome job. Many a time the certificates got lost or hidden in the pile of documents. Also, the physical copy got to wear and tear over a long period. The shares or dividends thus remained unclaimed for a long period. Sometimes the death of the shareholder and unaware family members also extended the duration of claiming. Thus there could be various reasons for the presence of IEPF unclaimed shares which resulted due to the transfer of those shares to IEPF.
Procedure to Claim the Share From IEPF
There are several steps to claim the dividend which has been transferred to IEPF by the authorized person. We will discuss them one by one.
- Open a Demat Account– The first step towards claiming the share from IEPF is to open a Demat Account because all the transactions through IEPF are done into the Demat account only. If already have an account then ignore this step.
- Fill the Form on the IEPF Portal– the claimant is required to go to the official website of the MCA portal and download the given form i.e. form IEPF-5 for the recovery of IEPF unclaimed shares and fill in the particulars very accurately. You must submit the form with the following details-
• The correct information of the claimant.
• Details of Aadhar Card if Indian citizen, passport or other related documents, if NRI.
• Details of the shares and the amount of the shares.
• Details of the company from which the amount is to be taken along with its CIN no.
• Demat account number and other account details to which the refund is transferred.
- Submission of the Claim to the Company– After filling out the form online, a copy of the same has to be sent to the related company enveloped and labeled as ‘Claim for a refund from IEPF’ along with the following documents-
• Copy of duly filled form IEPF-5 with signature of the claimant.
• Copy of the acknowledgment mentioned with the SRN no.
• Original copy of the Indemnity bond signed by the claimant as referred to under the stamp act.
• Share certificates for the physical ones, or copy of the statement of the transaction if online.
• Adhaar Card
• Canceled cheque leaf
• Copy of passport in case of NRI
- Submitting the Verification Report by the Company to the IEPF Office– After receiving the application for recovery of the IEPF unclaimed dividend, the company has to issue a verification report to the IEPF authority within 15 days stating the documentation of the shareholder or the claimant.
- Refund of the Unclaimed Share to the Claimant by the IEPF Authority– After receiving the verification from the related company, IEPF has to issue the refund sanction within 60 days. Afterward, the concerned authority will reimburse the amount into the claimant’s Demat Account.
Who Can Claim the Refund of Shares Transferred to the IEPF Authority
Any person who is a shareholder of the unclaimed dividend that has been transferred to IEPF is eligible to apply for the refund of the shares. In the case of the nominee or the successor of the shareholder, after his death, are required to submit the proof of transfer of the shares to them by the company and then apply for the refund process.