The government of India created the Investor Education and Protection Fund (IEPF) to educate investors and safeguard them from losing control of their assets and stock. There are innumerable instances of investors failing to appoint a nominee for their shareholdings.
This means that if the investor passes away, their investments are transferred to the government along with any unclaimed dividend money. These funds may then be used by the government as they deem fit unless the investor’s rightful heirs make their claim.
The IEPF allows and encourages investors to contact the government to demand their dividends and request that their long-forgotten shares be refunded thereby facilitating lost shares recovery.
The IEPF was established with the shareholders’ best interests in mind and it helps safeguarded the monies of investors while also raising awareness about the issue.
CAN INVESTOR CLAIM BACK HIS SHARES AND DIVIDENDS FROM IEPF
Investors can petition the government to receive the unclaimed dividends and unclaimed shares up to 7 years after they were deemed lost. Typically, people used to approach respective companies individually to get information about and then collect their dividends and shares. However, the IEPF is a one-stop solution that enables the public to claim their rightful inheritance from multiple companies through a single channel when it comes to the matter of recovery of unclaimed shares.
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INVESTORS AS PROTECTED UNDER COMPANIES ACT
The Companies Act of 2013 dictates IEPF’s operations. When a corporation announces a dividend on its stock, the shareholders have 30 days to claim it. If the dividends are not claimed by the shareholders after 30 days, the corporation is required under the above-mentioned legislation to transfer the dividends to a designated account known as the ‘Unpaid Dividend Account’.
Following that, the corporation has 90 days to post a list of all shareholders on its website, along with their unclaimed dividends. In case the company sends physical shares to the investor’s registered address and they are returned undelivered, they are then transferred to an ‘Unclaimed Suspense Account’. They can then be claimed from the aforementioned account. However, if they continue to remain unclaimed for seven years, they are then transferred to IEPF.
During this period, the company or its RTA can utilise any means of communication to notify its members of any unclaimed dividends or unclaimed shares held by the corporation. Typically this communication is done via email. If a shareholder wishes to collect their due from the ‘Unpaid Dividend Account’ or the ‘Unclaimed Suspense Account’, they must submit an application to the company’s transfer agent.
However, if a shareholder fails to collect a dividend from the firm for seven years for any reason, the corporation will transfer the unclaimed payout to the IEPF Account. If dividends are not claimed for seven years, the stock on which the dividend was declared is deemed forgotten stock. As a result, they are transferred in the name of the IEPF. If dividends go unclaimed for seven years, both the dividend and the shares are transferred to the IEPF account as well.
The procedure of IEPF shares recovery and claiming the dormant dividend has been simplified thanks to these guidelines. The entire process is now more transparent which guarantees that the payouts reach the proper people and are not tainted by fraud.