Many investors in India unknowingly leave their shares unclaimed due to various reasons such as misplaced documents, lack of awareness, or the passing of the original shareholder. To safeguard the interests of investors and ensure their rightful claims, the Government of India established the Investor Education and Protection Fund (IEPF) under the Companies Act, 2013. This fund collects unclaimed dividends and shares, and investors or their legal heirs can claim them back by following a legal procedure. This article provides an in-depth guide on how to recovery of shares from IEPF, the legal provisions governing the process, and answers to frequently asked questions.
Legal Provisions Governing Unclaimed Shares
The transfer and recovery of unclaimed shares are primarily governed by the following legal provisions:
Section 124(5) of the Companies Act, 2013: This mandates that dividends unclaimed for seven consecutive years be transferred to the IEPF.
Section 124(6) of the Companies Act, 2013: It states that if the dividend on any shares remains unclaimed for seven consecutive years, the company must transfer the shares to the IEPF.
Investor Education and Protection Fund Authority (Accounting, Audit, Transfer, and Refund) Rules, 2016: These rules provide the framework for transferring unclaimed shares to the IEPF and outline the procedure for shareholders to reclaim them.
Process of Recovering Unclaimed Shares from IEPF
To recover unclaimed shares from the IEPF, the claimant must follow a well-defined process:
Step 1: Check the Status of Unclaimed Shares
The claimant should first check whether the shares and dividends are transferred to the IEPF. This can be done through the company’s website or by contacting the company's Registrar and Transfer Agent (RTA).
Step 2: Complete Share Transmission (If Applicable)
If the original shareholder is deceased, the legal heir or nominee must complete the transmission of shares by providing proof of relationship, death certificate, and other relevant documents to the company before filing the IEPF claim.
Step 3: Filing Form IEPF-5
The claimant needs to download and fill out Form IEPF-5 from the Ministry of Corporate Affairs (MCA) website.
Details such as investor information, the name of the company, share details, and bank account information need to be provided.
The form must be submitted online, and an acknowledgment with a Service Request Number (SRN) is generated.
Step 4: Submission of Physical Documents to the Company
After online submission, the claimant must send the following documents to the company's Nodal Officer:
Printout of the filled IEPF form 5 with the claimant’s signature.
Copy of the acknowledgment with SRN number.
Indemnity bond on non-judicial stamp paper (as per applicable stamp duty).
Advance stamped receipt signed by the claimant and witnesses.
Original share certificates (if shares are in physical form) or a copy of the transaction statement (if shares are in Demat form).
Self-attested copies of Aadhaar card, PAN card, and cancelled cheque.
Step 5: Verification by the Company
The company verifies the claim and prepares a verification report within 15 days.
The report and documents are then forwarded to the IEPF Authority.
Step 6: Refund by IEPF Authority
The IEPF Authority reviews the claim, and if found valid, issues a refund sanction order.
The shares are transferred back to the claimant’s Demat account within 60 days of receiving the verification report.
Common Challenges in IEPF Share Recovery
Incomplete Documentation: Missing or incorrect documents can delay the process.
Mismatch in Details: If the claimant’s name or bank details do not match, the claim may be rejected.
Delay in Processing: The verification process may take longer than expected if the company fails to submit the report on time.
Legal Heir Disputes: In cases where multiple heirs claim the shares, additional legal formalities may be required.
Frequently Asked Questions (FAQs)
- Can I claim unclaimed shares directly from the company instead of the IEPF?
No, once shares are transferred to the IEPF, they can only be reclaimed through the IEPF by following the prescribed procedure.
- Is there a time limit for claiming shares from the IEPF?
No specific time limit is mentioned, but it is advisable to claim the shares at the earliest to avoid any future complications.
- What happens if the company does not provide a verification report on time?
If the company fails to submit the verification report within 15 days, it may be liable for penalties under the Companies Act, 2013. The claimant should follow up with the company to ensure timely processing.
- Can legal heirs claim shares from the IEPF?
Yes, legal heirs, nominees, or successors of deceased shareholders can claim shares from the IEPF. They must first complete the share transmission process with the company.
- Are there any fees for filing a claim with the IEPF?
No, the IEPF Authority does not charge any fees. However, there may be incidental costs, such as notary charges for attestation or stamp duty for the indemnity bond.
- How can I track the status of my IEPF claim?
After submitting Form IEPF-5, the claimant receives an SRN number, which can be used to track the status on the MCA website.
Conclusion
The Investor Education and Protection Fund (IEPF) is a critical initiative by the Government of India to protect the interests of investors. If your shares or dividends have been transferred to the IEPF, you can recover them by following the prescribed legal process. By ensuring proper documentation and timely follow-ups with the company and the IEPF Authority, investors and legal heirs can successfully reclaim their lost shares and dividends. If you need assistance, professional legal and financial advisors can help navigate the process more efficiently.
