IEPF stands for Investor Education & Protection Fund. IEPF was established under Section 205C of the Companies Act, 1956 by the Companies (Amendment) Act, 1999 to promote investor awareness and protect the interests of investors. Later, the IEPF Adviser was established under Section 125 (5) of the Companies Act, 2013 to administer the IEPF Funds and provide refunds of shares, unclaimed dividends, matured debentures, and other deposits to the investors and to promote investor awareness.
As per Section 124 (1) of the Companies Act 2013, companies are mandatorily required to transfer any dividends which go unclaimed or unpaid for a period of 30 days from the declaration date to a special bank account created by the company i.e. Unpaid Dividends Account, within a period of 7 days after the expiry of the said 30 days.
Under section 124 (5), any money transferred to the Unpaid Dividend Account of a company, which remains unclaimed or unpaid for a period of seven consecutive years, needs to be transferred or sent to the Investor Education and Protection Fund established. This means that any investor who has not claimed any dividends for a period of seven consecutive years will have to claim back his/her dividends from the Investor Education and Protection Fund (IEPF).
Further, as per section 124 (6) of the Companies Act 2013, the shares in respect of which dividends have not been paid or claimed for a period of seven consecutive years or more shall also be transferred by the company to the Investor Education and Protection Fund (IEPF) along with the unclaimed dividends. So any investor who has not claimed the dividends for a period of consecutive seven years will have to claim back the unclaimed dividends from the Investor Education and Protection Fund (IEPF) after following the complete procedure of filing the claim with the IEPF Adviser.
It is startling to know that as per the latest “Consultation Paper on refund process at IEPF Adviser” a staggering amount of dividends amounting to INR 5,685 Crores have been transferred to IEPF and ~117 Crores have been transferred to IEPF. As per various estimates these shares are worth ~50,000 Crores in current market value which are lying unclaimed with the IEPF Adviser.
To get the shares back from the IEPF Adviser, an investor has to go through numerous procedures and formalities to get the entitlement letter and then he / she can reclaim his shares / dividends from the IEPF Adviser by following the below mentioned steps:
A claimant has to submit Form IEPF-5 on the Ministry of Corporate Affairs portal for which he / she needs to information like – Demat account number, applicant information, company information from which the amount is due with CIN number, details of share to be claimed and details of dividend amount to be claimed.
After submitting the Form IEPF-5, the claimant should send the copy of the form in an envelope labelled “Claim for a refund from IEPF Authority” to the company’s IEPF Nodal Office / Registrar with the online application Form IEPF-5 with the claimant’s signature, copy of the acknowledgement with SRN number.
The company must prepare a verification report within 15 days of receiving a claim form from a claimant and submit it to the IEPF Adviser along with the claimant’s documentation.
The IEPF Adviser must decide on the claimant’s reimbursement application within 60 days after obtaining the verification report from the relevant company that has validated the claimant’s application.
The government is trying to simplify the process for claiming back shares & dividends from the IEPF Adviser however for senior citizens, foreign citizens, NRIs & legal heirs the process is still very complex, cumbersome & time-consuming. Investors or the legal heirs have to deal with multiple parties involved in the process including companies, their registrars, courts & IEPF Adviser to complete various compliances & documentation. IEPF Adviser keeps disseminating a lot of information for investor awareness through its websites & other channels however claimants still tend to make several mistakes in the process because of which the process is either stuck or delayed. Some of the common mistakes made by the claimants includes:
- Name of the applicant not matching with the PAN database.
- Date of birth of the applicant not matching with the PAN database.
- PAN No. not verified.
- Wrong Aadhar Card No. filled in the form.
- Wrong passport and OCI /PIO card details in case of foreign citizens.
- Whether Rule 7 of IEPF Rules is applicable or not is wrongly selected. It is to be selected as “Yes” in case the original shareholder is deceased
Rule 7 is wrongly selected as “Yes” in case of deletion of name cases. In the case of a joint holding if one of the joint holders has passed away it is only a case of “Name deletion” and does not get covered under IEPF (7)
Details of the name of the original security holder (deceased shareholder) and their beneficiary were wrongly mentioned. - Wrong folio number or numbers of folios filled in the form.
- No. of shares wrongly filled in the form.
- Wrong dividends details filled in the form which have been transferred to IEPF.
- Wrong financial year filled in the form.
- Wrong bank account or Demat account details filled in the form. The Bank account should be the one that is linked to the demat account.
- Wrong attachments or absence of compulsory attachments.
IEPF Adviser through its dedicated platform www.iepfadviser.com has been a pioneer in recovering multiple crores worth of shares recovery from the IEPF Adviser. Dealing with the bureaucracy isn’t easy in India but our widely renowned professionals have resolved IEPF Claims in even the utmost technical scenarios. Our professionals will first understand your matter in detail and then guide you on the best way forward to resolve IEPF-related matters. Our IEPF solutions include:
- End-to-end IEPF Claims for shares
- End-to-end IEPF Claims for dividends
- IEPF rejections
- IEPF delays
- Verification reports not filed
- Release of shares post approval from IEPF
