How to Recover Your Shares from IEPF

Introduction to IEPF

Investor Education and Protection Fund are referred to as IEPF. On September 7th, 2016, it was established by the Indian government under the Ministry of Corporate Affairs. The scope of the IEPF is covered by sub-sections (5), (6), and (7) of Section 125 of the 2013 Enterprises Act, which covers rules and regulations issued for investors and companies connected to the IEPF.

It was created to safeguard the interests of investors whose dividends on the Indian Stock Exchange have not yet been paid. Shares of investors are transferred to the IEPF Authority, with the exception of bonus or split shares, when dividends on the shares are not claimed or encashed for seven consecutive years. It is advised that shareholders maintain track of their money and claim their dividends on time.

Investor Education Protection Fund administration is the responsibility of the IEPF Authority (IEPF). The Authority makes investors whole for unclaimed dividends, matured deposits or debentures, and interest. It also revives inactive shares. Additionally, it is in charge of raising investor awareness and defending their financial interests.

According to Section 125 of the Companies Act of 2013 and the Rules issued thereunder, the investments that constitute a component of Investor Education Protection Funds (IEPF) are as follows:

1. Amounts in the firms’ unpaid dividend accounts, matured debentures with the companies and matured deposits with the companies
2. Application funds that the firms received for the allocation of any securities and are liable for a return
3. Amounts related to unpaid dividends and matured bonds have interest accumulated on them.

What is Dematerialisation of Physical Shares?

Dematerialization is the process of converting physical things into digital form. Since the physical transfer of shares is prohibited by the Securities and Exchange Board of India (SEBI), this dematerialization allows for the transfer of shares.

What are the Documents required for Recovery of Shares from IEPF?

For recovering shares from the IEPF, the following papers are needed:

1. Claim form containing the claimant’s signature and, if there are joint holders, the signatures of each joint holder.
2. A copy of the acknowledgment with the claimant’s proper attestation and the SRN number.
3. An indemnification bond signed by the claimant
4. Original certificate of a repayment of a matured deposit, debenture, or bonds, with an advance stamped receipt
5. Aadhar cards for both the claimant and, if there are joint holders, each joint holder.
6. Client Master List that the claimant has properly authenticated.
7. Share Certificate Proof of Eligibility Canceled Check Passport, including an OCI and PIO card for foreign nationals and NRIs.
8. Joint Holder’s death certificate, if he is deceased.
9. Additional records, if any

The Nodal Officer or Registrar of the firm or bank is required to submit a verification report to the IEPF Authority.

What is the Procedure for Recovery of Shares from IEPF?

Investor Education Protection Funds (IEPF) exist only to safeguard the interests of investors. However, once they are moved to the IEPF, shareholders find it difficult to claim their shares or dividends. To recover shares from the IEPF, a certain procedure as laid forth by the IEPF and relevant legislation must be followed.

Investors whose shares, unclaimed dividends, matured debentures or deposits, application money to be refunded and interest accrued on the same, sale proceeds of fractional shares, etc. have been transferred to IEPF may apply under subsection (3) of Section 125 of the Companies Act 2013 from the appropriate Authority to claim their shares in accordance with the procedure outlined in subsection (6) of Section 124.

If the claimant is a registered shareholder’s legal heir, nominee, or successor, the corporation must complete the transmission procedure and furnish the claimant with an entitlement letter before the claimant can submit an IEPF claim to the Authority.

Form IEPF 5 is the IEPF’s recommendation for submitting a claim for the recovery of shares. However, in order to avoid any complaints, the firm or RTA must first give their requisite consent before completing this Form IEPF 5.

Which Funds transferred to IEPF?

The following payments are transferred to IEPF and may be reclaimed in the future for the recovery of shares from IEPF:

1. Unclaimed corporate debt obligations and the interest accumulated on them.
2. Unrealised money from firms’ matured deposits

What are the Basic Requirements of Form IEPF 5 for Recovery of Shares from IEPF?

This IEPF 5 Form is submitted by the claimant in order to claim the shares. There may be only one claim each year, and if the Form is refused for any of the above reasons, the claimant must wait until the next year. The following information must be on the Form IEPF 5:

1. Information about the claimant
2. company information together with the CIN number
3. Information about the shares that must be claimed
4. The entire dividend amount that must be claimed
5. a list of the annual deposits and securities.
6. If the claimant is an NRI, an Aadhaar number and passport are required.
7. Aadhar number-linked bank account information is used to reimburse the claim amount.

Process of Recovery of Shares from IEPF

The following steps must be taken in the event that shares are recovered:

1. Before claiming any of the company’s shares, an investor who is requesting a recovery of shares must first finish their transmission procedure with the company. They must then submit an Application for such shares to the Ministry of Corporate Affairs in the provided IEPF Form 5[1] with all the necessary information.
2. The claimant then delivers the identical Form, along with any necessary documentation, to the company’s Nodal Officer or Registrar. It is delivered in a package labeled “Claim for a reimbursement from IEPF authorities.”
3. Within 15 days, the enterprise must produce a validated report and send it, in a format recommended by the authority, to the authority.
4. The Authority and the Drawing and Disbursement Officer properly verify the claimant’s eligibility, and then they submit a bill to the Pay and Accounts Officer for payment in accordance with the rules.
5. A sanction order for a refund is issued by Authority together with the relevant Authority’s permission.
6. If the claimant has physical share certificates, duplicate certificates are invalidated and shares are transferred to the claimant. Alternatively, shares may be credited to the claimant’s demat account.
7. Once the firm has provided the verification report, the refund is processed within 60 days.

Nodal Officers are one of the Company’s directors, chief financial officers, or company secretaries. A corporation may designate a Deputy Nodal Officer to assist the named Nodal Officer in verifying claims and coordinating with the Investor Education and Protection Fund (IEPF) Authority about the recovery of shares from IEPF. All of the Deputy Nodal Officer’s acts are held accountable to the Nodal Officer. Additionally, if a Nodal Officer is not appointed by the firm, then each director of that company is deemed to be a Nodal Officer and is held accountable for all failures in the same manner as a Nodal Officer.

Conclusion

An application is submitted in the required form, Form IEPF 5, to recover shares from IEPF. The Ministry of Corporate Affairs has released the 2017 Investor Education and Protection Fund Rules in order to reclaim such shares. According to Section 125 of the 2013 Companies Act, this Rule was created. Additionally, in accordance with this Rule, any dividend that is underpaid or unclaimed for more than seven years in a row following the date of declaration is transferred to the Investor Education and Protection Fund (IEPF). However, one must finish the company’s transmission process before filing for the recovery of such shares. The Nodal Officer of the company verifies the claim after it is submitted in the designated form, and following successful verification, it sends a verified report to the IEPF Authority. The Authority then issues a receipt as evidence of transfer and a sanction letter for a refund in the claimant’s favour. The claimant is then given ownership of the shares. Within 60 days of the firm submitting its verification report to the IEPF Authority, it is completed.

Originally published at https://mudssmanagement.blogspot.com on October 5, 2022.