Dividend Management and Claiming Shares from IEPF: A Comprehensive Guide

This guide aims to provide a detailed understanding of the procedures involved in managing dividends and claiming shares from the Investor Education and Protection Fund (IEPF) under the provisions of the Companies Act, 2013.

1. Dividend Management

A. Deposit of Dividend in a Separate Account

Under Section 123(4) of the Companies Act, 2013, the amount of dividend, including interim dividend, must be deposited into a separate account in a scheduled bank within five days from the declaration date. This is applicable unless the company’s Articles of Association already authorize a different procedure. If the Articles do not authorize this, they must be amended accordingly.

B. Transfer of Unpaid or Unclaimed Dividend to the Unpaid Dividend Account

As per Section 126(1), if a declared dividend remains unpaid or unclaimed by any shareholder within 30 days from the date of declaration, the company must transfer the amount to the Unpaid Dividend Account. This transfer must be done within seven days from the expiry of the 30-day period. The company should open a special account with a scheduled bank called the "Unpaid Dividend Account" for this purpose.

C. Custodianship of Unpaid Dividend

Once the dividend is transferred to the Unpaid Dividend Account, the company holds no beneficial interest in the amount. It acts as a custodian, much like a trustee, until the dividend is claimed by the shareholder. (Section 124)

D. Record Keeping and Reconciliation

The company must maintain a register detailing unpaid or unclaimed dividends and reconcile the Unpaid Dividend Account with the concerned bankers periodically. For listed companies, this reconciliation should take place on a fortnightly basis during the initial validity of dividend warrants and thereafter on a quarterly basis until the funds are transferred to the IEPF.

2. Procedure for Claiming Shares from IEPF

Shareholders or claimants can reclaim shares transferred to the IEPF by following a structured process:

Step 1: Submit Online Application (Form IEPF-5)

The claimant must submit an online application in Form IEPF-5 to the IEPF Authority for a refund.

Step 2: Send Documents to the Company

Simultaneously, the claimant must send a signed application to the company along with the required documents (as outlined in Form IEPF-5). This is done for verification of the claim by the company. The application should be sent to the nodal officers at the company's registered office.

Step 3: Company Verification and Report Submission

Upon receipt of the claim, the company must verify the claim and submit a verification report to the IEPF Authority within 15 days. This report must be accompanied by all the documents submitted by the claimant.

• Note: If the IEPF Authority does not receive the required documents within 90 days from filing Form IEPF-5, the application may be rejected. However, the claimant will be given an opportunity to provide a response within 30 days.

Step 4: Entitlement Verification and Refund Process

After the IEPF Authority verifies the claimant’s entitlement:

• For dividend claims, the Authority and the Drawing and Disbursement Officer will process the claim for e-payment as per the guidelines.
• For share claims, the Authority will issue a refund sanction order and credit the shares to the claimant's DEMAT account based on the claimant’s entitlement.

Step 5: Disposition of Claims by IEPF

The IEPF Authority must dispose of the refund claims within 60 days from the date of receiving the verification report from the company. If the claim cannot be disposed of within 60 days, the reasons for the delay must be recorded in writing and communicated to the claimant either in writing or electronically.

Step 6: Transmission of Shares for Legal Heirs or Successors

If the claimant is a legal heir, successor, administrator, or nominee of the registered shareholder, the transmission process must be completed by the company before the claim is filed with the IEPF Authority.

Step 7: Transmission in Case of Transfer to IEPF

In the case where shares have been transferred to the IEPF, the company must verify all the required documents to process the transfer or transmission of shares. A letter indicating the claimant's entitlement should be issued to the claimant, and a copy of this letter must be sent to the IEPF Authority.

Step 8: Filing of Consolidated Claims

The claimant can file only one consolidated claim for a company in a financial year.

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Article Compiled by:-

~Neel Lakhtariya

(LegalMantra.net Team)