All About the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2021

I. Introduction

The MCA has notified a new set of rules, Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2021, to amend the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 which shall come into force as on the date of its publication in the Official Gazette.

II. Highlights

• Insertion of a new clause (fa) in Rule 3 sub-rule 2.
• Insertion of new, Rule 6A- Manner of transfer of shares under sub-section (9) of section 90 of the Act to the Fund.
• Revision of Forms IEPF-4 & IEPF-7.

III. Amendments

A. Insertion of clause (fa) in Rule 3 sub-rule 2

In addition to the existing list of amounts which shall be credited to the fund (Rule 3 sub-rule 2), a new clause is inserted, which states that all shares held by the Authority in accordance with proviso of Section 90(9) of the Act and all the resultant benefits arising out of such shares shall also be credited to the fund.

Section 90: Register of significant beneficial owners in a company

(9) 'The company or the person aggrieved by the order of the Tribunal may make an application to the Tribunal for relaxation or lifting of the restrictions placed under sub-section (8), within a period of one year from the date of such order:

Provided that if no such application has been filed within a period of one year from the date of the order under sub-section (8), such shares shall be transferred, without any restrictions, to the authority constituted under sub-section (5) of section 125, in such manner as may be prescribed'

B. Insertion of new, Rule 6A- Manner of transfer of shares under sub-section (9) of section 90 of the Act to the Fund

- The shares shall be credited to the DEMAT A/C of the Authority within a period of 30 days of such shares becoming due to be transferred. Further transfer of shares by the Companies to the Fund shall be deemed to be transmission of shares. Furthermore, such transfer shall be free from any restrictions and cannot be claimed back.

- For the purposes of effecting transfer, the Board shall authorize the Company Secretary or any other person to sign the necessary documents.

- Procedure of transfer:

a. Shares held in electronic form

1. The Company shall inform the depository.
2. On receipt of such intimation, the depository shall effect the transfer of shares in favor of DEMAT account of the Authority.

b. Shares held in physical form

i. Company Secretary or the person authorized by the Board shall make an application, on behalf of the concerned shareholder, to the Company, for issue of a new share certificate.

ii. On receipt of the application, a new share certificate (in SH-1) shall be issued and it shall be stated on the face of the certificate that:

'Issued in lieu of share certificate No..... for the purpose of transfer to IEPF under subsection (9) of section 90 of the Act'

Further, the same be recorded in the register maintained for the purpose.

iii. After issue of a new share certificate, the Company shall inform the depository and place a request to convert the share certificates into DEMAT form and transfer in favour of the Authority.

- The Company shall make such transfers through corporate action and shall preserve copies for its records.

- IEPF-4: The Company shall send a Statement to the Authority in Form IEPF-4 within 30 days of the corporate action taken containing details of such transfer along with a copy of order of the Tribunal under Section 90(8) of the Act and a declaration that no application under Section 90(9) of the Act has been made or is pending before the Tribunal.

- Voting Rights: The voting rights on shares transferred to the Fund shall remain frozen. Further, for the purpose of SEBI (SAST) Regulations, 2011, the shares which have been transferred to the Authority shall not be excluded while calculating the total voting rights.

- Benefits: All benefits accruing on such shares (including dividend), except right issue, shall also be credited to such DEMAT account.

- Delisting of securities: If the company is getting delisted, the Authority shall surrender shares on behalf of the shareholders and the proceeds realized shall be credited to the Fund.

- Winding-up: In case the Company is being wound up, the Authority may surrender the securities to receive the amount entitled on behalf of the security holder and credit the amount to the Fund.

- IEPF-7: Any amount required to be credited by the Companies to the Fund shall be remitted into the specified account of the IEPF Authority maintained in the Punjab National Bank. The details thereof shall be furnished to the Authority in Form IEPF-7 within 30 days from the date of remittance.

Disclaimer: The author is based in Jabalpur and is a Practicing Company Secretary dealing in Corporate, Legal & Taxation services. The information contained in this write up, as provided by the author, is to provide a general guidance to the intended user. The information should not be used as a substitute for specific consultations. Author recommends that professional advice is sought before taking any action on specific issues.

The author can also be reached at cstanveersaluja@gmail.com