Transfer and disclosure to Investor Education and Protection Fund

[As per Newly introduced "Investor education and protection fund authority (accounting, audit, transfer and refund) rules, 2016"]

Ministry of corporate Affairs has issued Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 and also implemented the provisions of Section 124 and 125 (remaining provisions) of the Companies Act, 2013 relating to the Investor Education and Protection Fund. These rules have been effective w.e.f. 7th September, 2016.

Further the Ministry has also issued Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2017 which has revised the procedure related to transfer of Shares to the Investor Education and Protection Fund (IEPF) under Section 124(6) and 125 of the Companies Act, 2013

Transfer to the IEPF (the Fund):

As per the provisions of Section 124 any amount which remained unpaid or unclaimed within 30 days of from the date of the declaration to any shareholder, the Company shall within 7 days from the expiry of said period of 30 days transfer the total amount of dividend which remains unpaid or unclaimed to a special account to be opened by the Company in that behalf in any scheduled bank to be called as Unpaid Dividend Account;

The Company shall within a period of 90 days of making any transfer to Unpaid Dividend Account, prepare a statement containing the names, their last known address and the unpaid dividend to the paid to each person and place it on the website of the Company, and also on any other website as approved by the Central Government for this purpose;

If any default is made in transferring the total unpaid or unclaimed amount to Unpaid Dividend Account, the Company shall pay, from the date of such default, interest on so much of the amount as has not been transferred to the said account, at the rate of 12% per annum and the interest accruing on such amount shall ensure to the benefit of the members of the Company in the proportion to the amount remaining unpaid to them;

Any amount transferred to Unpaid Dividend Account and amount as prescribed under Section 125(2) (a) to (n), which remained unclaimed or unpaid for a period of 7 years from the date of such transfer shall be transferred by the company along with the interest accrued, if any, thereon to the Investor Education and Education Fund;

Any amount required to be credited to the Fund shall be remitted into the specified branches of Punjab National Bank, which is the accredited bank of the Pay and Accounts office, Ministry of Corporate Affairs and other authorized banks engaged by the MCA-21 system, within a period of thirty days of such amounts becoming due to be credited to the Fund;

The amount shall be tendered by the Companies along with the challan in triplicate to the specified bank branches who will return two copies of the challan, duly stamped in token of having received the amount, to the Company.

The Company shall file, along with the copy of the challan as required furnish a statement in form no. IEPF 1 containing details of such transfer to the Authority within thirty day of submission of challan;

The amount may also be remitted by Electronic Fund Transfer in such manner as may be specified by the Central Government;

The Company shall maintain record consisting of name, last known address, amount, folio number, or client ID, certificate number, beneficiary details etc. of the person in respect of whom unpaid or unclaimed amount has remained unpaid or unclaimed for a period of seven years and has been transferred to the fund and the authority shall have the powers of inspect such records;

Every company shall within a period of 90 days after the holding of Annual General Meeting every year till the completion of seven years period, identify the unclaimed amounts, as referred in sub section 2 of Section 125 of the Companies Act, 2013 as on the date of the AGM, and separately furnish and upload on its own website and also on website of Authority or any other website as may be specified by the Government, a statement or information through form no. IEPF 2, separately for each year, containing following information namely;

• The name and last known addresses of the persons entitled to receive the sums;
• The nature of the amount;
• The amount to which each person is entitled;
• The due date for transfer into the Investor Education and Protection Fund; and
• Such other information as may be considered relevant for the purpose.

Manner of transfer of shares Under Section 124(6): Pursuant to Section 124(6) a new concept has been introduced. All shares in respect of which dividend has not been paid or claimed for seven consecutive years or more shall be  transferred by the Company in the name of Investor Education and Protection Fund along with a statement containing such details as may be prescribed.

The claimant of shares transferred to IEPF shall be entitled to claim the transfer of shares from IEPF in accordance with such procedure and on submission of such documents as may be prescribed.

For this purpose in case any dividend is paid or claimed for any year during the said period of seven consecutive years, the shares shall be transferred to IEPF.

For the purpose of effecting transfer of shares, the Board shall authorize the Company Secretary or any other person to sign the necessary documents;

The company shall inform at the latest available address, the shareholder concerned regarding transfer of shares three months before the due date of transfer to shares and also simultaneously publish a notice in a leading newspaper in English and regional language having wide circulation that the name of such shareholders and their folio number / DP-ID / Client Id are available on their website giving details of such email id;

Where the seven years have been completed or are being completed within three months from the date of coming into force of these rules, the Company shall initiate the aforesaid procedure immediately and the due date of such transfer of the shares has been fixed to 31st May, 2017;

In case where there is a specific order of the Court of Tribunal or Statutory Authority restraining any transfer of such shares and payment of dividend, the Company shall not transfer such shares to the Fund. However, the Company shall furnish the details of such shares and unpaid dividend to the IEPF Authority in Form no. IEPF 3 within thirty days from the end of financial year;

For effecting transfer of shares held in demat mode: The Company shall inform the depository by way of corporate action, where the shareholders have their account for transfer in favour of the authority. On receipt of such information the depository shall effect the transfer in favour of the demat account of the Authority;

For effecting transfer of shares held in physical mode the Company Secretary or the person so authorized by the Board shall make an application on behalf of concerned shareholders for issue of duplicate share certificates;

• On receipt of application a share certificate for each such shareholder shall be issued and it shall be stated on the face of it and be recorded in register maintained for the purpose, that the duplicate certificate is "issued in lieu of share certificate no for transfer to IEPF" and the word "Duplicate" shall be stamped or punched in bold letters across the face of the share certificate;
• Particulars of every share certificate issued as above shall be entered forthwith in a register of renewed and duplicate share certificates as specified in the Companies (Share Capital and Debentures) Rules, 2014;
• After issue of duplicate share certificate, the Company shall inform the depository by ways of corporate action to convert the duplicate share certificate into Demat form and transfer in favour of the Authority.
• The shares shall be credited to the Demat Account of the Authority to be opened by the Authority for the said purpose, within a period of 30 days of such shares becoming due to be transferred to the fund.

The Company shall make such transfer through corporate action and shall preserve the copies for its record;

All benefits accruing on such shares e.g. bonus shares, split, consolidation, fraction shares etc. shall also be credited to demat account of the Authority.

The company shall send a statement to the fund inform IEPF 4 containing details of such transfer;

The voting rights on such shares shall remain frozen until the rightful owner claims the shares. However, for the purpose of SEBI( Substantial Acquisition of Shares and Takeover) Regulations, 2011, the shares which have been transferred to the Authority shall not be excluded while calculating the total voting rights;

The shares held in such IEPF Suspense account shall not be transferred or dealt with in any manner whatsoever except for the purpose of transferring the shares back to the claimant as and when he approaches the Authority;

If the Company is getting delisted / would up,the Authority shall/may surrender shares on behalf of shareholders and the proceeds realized shall be credited to the Fund;

Any further dividend received on such shares shall be credited to the Fund;

Refund of Claimants form the IEPF Authority:

• Any person, whose shares, unclaimed dividend, matured deposits or debentures, application money due for refund, or interest thereon, sales proceeds of fractional shares, redemption proceeds of preference shares etc. has been transferred to the Fund, may claim the shares or apply for refund as the case may be to the Authority by making an application in form IEPF 5 online available on the website www.iepf.gov.in along with fee, as decided by the Authority from time to time.
• The claimant shall after making an online application, send the same duly signed by him along with requisite documents as enumerated in form IEPF 5 to the concerned company at its registered office for verification of his claim;
• The Company shall, within fifteen days of receipt of claim form, send a verification report to the Authority in the format specified along with the documents so received;
• After verification of the entitlement of the claimant the Authority, within 60 days from the date of receipt of verification report from the company, shall :
  • electronically pay the amount so claimed;
  • credit the shares to the demat account of the shareholder; or
• In case, claimant is the legal heir or successor or administrator or nominee of the registered shareholder, he has to ensure that the transmission process is completed by the Company before filing any claim to the Authority.
• In case the Company has received the transmission request as above after transfer of shares to the Authority, the Company shall verity all requisite documents and shall issue letter to the claimant indicating his entitlement of the said shares and furnish the copy of the same to the Authority while verifying the claim of such claimant.
• The claimant shall file one consolidated claim in respect of a company in a financial year.

Disclosure of amount due to be transferred to the Fund:

• The company shall furnish a statement to the Authority in form IEPF 6 within 30 days of the end of financial year stating therein the amounts due to be transferred to the Fund in the next financial year;
• The company shall also furnish a statement to the authority within 30 days of the closure of its accounts for the financial year stating therein the reasons of deviation, if any, of amount so disclosed and actual amount transferred to the Fund.

Summary of Actions under New Regime of IEPF:

The company shall furnish a statement to the Authority in form IEPF 6 within 30 days of the end of financial year stating therein the amounts due to be transferred to the Fund in the next financial year;

The company shall also furnish a statement to the authority within 30 days of the closure of its accounts for the financial year stating therein the reasons of deviation, if any, of amount so disclosed and actual amount transferred to the Fund.

As per the provisions of Section 124 any amount which remained unpaid or unclaimed within 30 days of from the date of the declaration to any shareholder, the Company shall within 7 days from the expiry of said period of 30 days transfer the total amount of dividend which remains unpaid or unclaimed to a special account to be opened by the Company in that behalf in any scheduled bank to be called as Unpaid Dividend Account;

The Company shall within a period of 90 days of making any transfer to Unpaid Dividend Account, prepare a statement containing the names, their last known address and the unpaid dividend to the paid to each person and place it on the website of the Company, and also on any other website as approved by the Central Government for this purpose;

Any amount transferred to Unpaid Dividend Account and amount as prescribed under Section 125(2) (a) to (n), which remained unclaimed or unpaid for a period of 7 years from the date of such transfer shall be transferred by the company along with the interest accrued, if any, thereon to the Investor Education and Education Fund;

The Company shall file, along with the copy of the challan as required furnish a statement in form no. IEPF 1 containing details of such transfer to the Authority within thirty days of submission of challan;

Every company shall within a period of 90 days after the holding of Annual General Meeting every year till the completion of seven years period, identify the unclaimed amounts, as referred in sub-section 2 of Section 125 of the Companies Act, 2013 as on the date of the AGM, and separately furnish and upload on its own website and also on website of Authority or any other website as may be specified by the Government, a statement or information through form no. IEPF 2.

All shares in respect of which dividend has not been paid or claimed for seven consecutive years or more shall be transferred by the Company in the name of Investor Education and Protection Fund along with a statement containing such details as may be prescribed in form IEPF 4.