Procedure of Transfer of Shares to IEPF and IEPF Amended Rules, 2017

IEPF (Amendment) RULES 2017
&
Procedure for Transfer of Shares to IEPF

SECTION 124 OF COMPANIES ACT 2013

[Section 124 + IEPF Rules, 2016 + IEPF (Amendment) Rules, 2017 + IEPF (Second Amendment) Rules, 2017 as on 13.10.2017]

(1)  Where a dividend has been declared by a company but has not been paid or claimed within thirty days from the date of the declaration to any shareholder entitled to the payment of the dividend, the company shall, within seven days from the date of expiry of the said period of thirty 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 the Unpaid Dividend Account.

(2) The company shall, within a period of ninety days of making any transfer of an amount under sub-section (1) to the Unpaid Dividend Account, prepare a statement containing the names, their last known addresses and the unpaid dividend to be paid to each person and place it on the website of the company, if any, and also on any other website approved by the Central Government for this purpose, in such form, manner and other particulars as may be prescribed.

3) If any default is made in transferring the total amount referred to in sub-section (1) or any part thereof to the Unpaid Dividend Account of the company, it 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 twelve per cent. per annum and the interest accruing on such amount shall ensure to the benefit of the members of the company in proportion to the amount remaining unpaid to them.

(4) Any person claiming to be entitled to any money transferred under sub-section (1) to the Unpaid Dividend Account of the company may apply to the company for payment of the money claimed.

(5) Any money transferred to the Unpaid Dividend Account of a company in pursuance of this section which remains unpaid or unclaimed for a period of seven years from the date of such transfer shall be transferred by the company along with interest accrued, if any, thereon to the Fund established under sub-section (1) of section 125 and the company shall send a statement in the prescribed form of the details of such transfer to the authority which administers the said Fund and that authority shall issue a receipt to the company as evidence of such transfer.

As amended by Company (A) Act, 2015

(6) All shares in respect of which dividend has not been paid or claimed for 7 consecutive years or more shall also 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:

Provided that any claimant of shares transferred above shall be entitled to claim the transfer of shares from Investor Education and Protection Fund in accordance with such procedure and on submission of such documents as may be prescribed.

(7) If a company fails to comply with any of the requirements of this section, the company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

IEPF (Accounting, Audit, Transfer and Refund)) AMENDMENTS RULES 2017

Key Highlights Points:

Amendment in IEPF rules 2016 for Transfer of Shares to IEPF:

1.   IEPF Rules 2017 come into force from 28^th February 2017.

2.   In the IEPF Rules, 2016, in rule 2, in sub-rule (1), for sub-rule (d), the following shall be substituted, namely:

Definition of Company & Corporate Action

 (d) “Company” means a company defined in sub-section (20) of section 2 of the Act and includes ‘corresponding new bank’ as defined in sub-section (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) and clause (b) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980) and ‘subsidiary bank’ as defined in clause (k) of section 2 of State Bank of India (Subsidiary Bank) Act, 1959 (38 of 1959);

(da) “Corporate action” means any action taken by the company relating to transfer of shares and all the benefits accruing on such shares namely, bonus shares, split, consolidation, fraction shares etc., except right issue to the Authority.

4.      for rule 6, the following rule shall be substituted, namely: -

“6. Manner of transfer of shares under section 124(6) to the Fund.-

(1)  The shares shall be credited to DEMAT Account of the Authority to be opened by the Authority for the said purpose, within a period of thirty days of such shares becoming due to be transferred to the Fund:

 PROVIDED THAT, in case the beneficial owner has encashed any dividend warrant during the last seven years, such shares shall not be required to be transferred to the Fund even though some dividend warrants may not have been encashed:

NEW PROVISO (2nd)- IMPORTANT 

Earlier Proviso 
PROVIDED FURTHER that in cases where the period of seven years provided under sub-section (5) of section 124 has been completed or being completed during the period from 7th September, 2016 to 31st May, 2017, the due date of transfer of such shares shall be deemed to be 31st May, 2017.

SECOND AMENDMENT & NEW PROVISO (3rd)- IMPORTANT 

In Place of earlier second Proviso (substituted 13.10.2017)
“Provided further that in cases where the period of seven years provided under sub-section (5) of section 124 has been completed or being completed during the period from 7th September, 2016 to 31st October, 2017, the due date of transfer of such shares shall be deemed to be 31st October, 2017.”;

(b) after the second proviso, the following proviso shall be inserted, namely:—
NEWLY INSERTED on 13.10.2017
“Provided further that transfer of shares by the companies to the Fund shall be deemed to be transmission of shares and the procedure to be followed for transmission of shares shall be followed by the companies while transferring the shares to the fund.”.

(2) For the purposes of effecting transfer of such shares, the Board shall authorize the Company Secretary or any other person to sign the necessary documents.

(3) The company shall follow the following procedure while transferring the shares, namely:-

 (a) The company shall inform, at the latest available address, the shareholder concerned regarding transfer of shares three months before the due date of transfer of shares and also simultaneously publish a notice in the leading newspaper in English and regional language having wide circulation informing the concerned that the names of such shareholders and their folio number or DP ID - Client ID are available on their website duly mentioning the website address.

(b) In case, where there is a specific order of Court or Tribunal or statutory Authority restraining any transfer of such shares and payment of dividend or where such shares are pledged or hypothecated under the provisions of the Depositories Act, 1996 or shares already been transferred under sub-rule (1) above, the company shall not transfer such shares to the Fund:

Provided that the company shall furnish details of such shares and unpaid dividend to the Authority in Form No. IEPF 3 within thirty days from the end of financial year.

Simplified Procedure for Transfer of Shares to IEPF:

A) If Shares in Demat Form

(c) For the purposes of effecting the transfer, where the shares are dealt with in a depository-

(i) The Company shall inform the depository by way of corporate action, where the shareholders have their accounts for transfer in favour of the Authority.

(ii) On receipt of such intimation, the depository shall effect the transfer of shares in favour of DEMAT account of the Authority.

B) If Shares in Remat Form:

(d) For the purposes of effecting the transfer where the shares are held in physical form-

NEWLY INSERTED w.e.f 13.10.2017

(i) the Company Secretary or the person authorised 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 under clause (a), a new share certificate for each such shareholder 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” and the same be recorded in the register maintained for the purpose;

(iii) particulars of every share certificate shall be in Form No. SH-1 as specified in the Companies (Share Capital and Debentures) Rules, 2014;

(iv) after issue of a new share certificate, the company shall inform the depository by way of corporate action to convert the share certificates into DEMAT form and transfer in favour of the Authority.

(Application > Duplicate SC > Entry in Register > Demat of Shares > Transfer to Fund)

(4) The company shall make such transfers through corporate action and shall preserve copies for its records.

(5) While affecting such transfer, the company shall send a statement to the Authority in Form No. IEPF 4 containing details of such transfer.

(6) The voting rights on shares transferred to the Fund shall remain frozen until the rightful owner claims the shares: Provided that for the purpose of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, the shares which have been transferred to the Authority shall not be excluded while calculating the total voting rights.

(7) The company shall maintain the details of shareholding of each individual shareholders whose shares have been credited to the DEMAT account of the Authority.

(8) All benefits accruing on such shares e.g., bonus shares, split, consolidation, fraction shares etc., except right issue shall also be credited to such DEMAT account.

 (9) The shares held in such DEMAT account shall not be transferred or dealt with in any manner whatsoever except for the purposes of transferring the shares back to the claimant as and when he approaches the Authority or in accordance with sub-rule (10) and (11).

If Company Delisted:-

10) If the company is getting delisted, the Authority shall surrender shares on behalf of the shareholders in accordance with the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 and the proceeds realised shall be credited to the Fund and a separate ledger account shall be maintained for such proceeds.

If Company Wound-up:-

 (11) In case the company whose shares or securities are held by the Authority 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 and a separate ledger account shall be maintained for such proceeds.

(12) Any further dividend received on such shares shall be credited to the Fund and a separate ledger account shall be maintained for such proceeds”.

NEWLY INSERTED w.e.f 13.10.2017

“(13) Any amount required to be credited by the companies to the Fund as provided under sub-rules (10), (11) and sub-rule (12) shall be remitted into the specified account of the IEPF Authority maintained in the Punjab National Bank.

(14) Authority shall furnish its report to the Central Government as and when noncompliance of the rules by companies came to its knowledge.”. 

5.   In Principal Rules, for rule 7, the following rule shall be substituted, namely:- Refund to claimants from Fund.-

(1)    Any person whose shares, unclaimed dividend, matured deposits, matured debentures, application money due for refund, or interest thereon, sale proceeds of fractional shares, redemption proceeds of preference shares etc., has been transferred to the Fund, may claim the shares under proviso to sub-section (6) of section 124 or apply for refund under clause (a) of sub-section (3) of section 125 or under proviso to sub-section (3) of section 125, as the case may be, to the Authority by submitting an online application in Form IEPF-5 available on the website www.iepf.gov.in along with fee specified by the Authority from time to time in consultation with the Central Government.

(2) The claimant shall after making an application in Form IEPF-5 under rule (1), 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.

NEWLY INSERTED w.e.f 13.10.2017

IMPORTANT
“(2A) Every company which has deposited the amount to the Fund shall nominate a Nodal Officer for the purpose of coordination with IEPF Authority and communicate the contact details of the Nodal Officer duly indicating his or her designation, postal address, telephone and mobile number and company authorized e-mail ID to the IEPF Authority, within fifteen days from the date of publication of these rules and the company shall display the name of Nodal Officer and his e-mail ID on its website.”;

(3) The company shall, within fifteen days from the date of receipt of claim, send a verification report to the Authority in the format specified by the Authority along with all the documents submitted by the claimant.

“Provided that in case of non receipt of documents by the Authority after the expiry of ninety days from the date of filing of Form IEPF-5, the Authority may reject Form IEPF-5, after giving an opportunity to the claimant to furnish response within a period of thirty days.”;

(4) After verification of the entitlement of the claimant-

(a) to the amount claimed, the Authority and then Drawing and Disbursement Officer of the Authority shall present a bill to the Pay and Accounts Office for e- payment as per the guidelines, (b) to the shares claimed, the Authority shall issue a refund sanction order with the approval of the Competent Authority and shall credit the shares to the DEMAT account of the claimant to the extent of the claimant’s entitlement.

(5) The Authority shall, in its records, cause a note to be made of all the payments made under sub-rule (4).

(6) An application received for refund of any claim under this rule duly verified by the concerned company shall be disposed off by the Authority within sixty days from the date of receipt of the verification report from the company, complete in all respects and any delay beyond sixty days shall be recorded in writing specifying the reasons for the delay and the same shall be communicated to the claimant in writing or by electronic means.

 (7) In cases, where the application is incomplete or not approved, a communication shall be sent to the claimant and the concerned company by the Authority detailing deficiencies of the application.
“Provided that in case of non receipt of rectified documents by the Authority after the expiry of ninety days from the date of such communication, the Authority may reject Form IEPF-5, after giving an opportunity to the claimant to furnish response within a period of thirty days.”.

(8) In case, claimant is a legal heir or successor or administrator or nominee of the registered share holder, he has to ensure that the transmission process is completed by the company before filing any claim with the Authority.

(9) In case, claimant is a legal heir or successor or administrator or nominee of any other registered security or in cases where request of transfer or transmission of shares is received after the transfer of shares by company to the Authority, the company shall verify all requisite documents required for registering transfer or transmission and shall issue letter to the claimant indicating his entitlement to the said security and furnish a copy of the same to the Authority while verifying the claim of such claimant.

(10) The claimant shall file only one consolidated claim in respect of a company in a financial year.

(11) The company shall be liable under all circumstances whatsoever to indemnify the Authority in case of any dispute or lawsuit that may be initiated due to any incongruity or inconsistency or disparity in the verification report or otherwise and the Authority shall not be liable to indemnify the security holder or Company for any liability arising out of any discrepancy in verification report submitted etc., leading to any litigation or complaint arising thereof.”.

http://www.iepf.gov.in/IEPFA/notification.html

SECURITIES AND EXCHANGE BOARD OF INDIA (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015

SCHEDULE VI: MANNER OF DEALING WITH UNCLAIMED SHARES

Regulation 39(4)

A. The listed entity may delegate the following procedural requirements to a share transfer agent.

B. Reminders to be sent

(1) The listed entity shall send at least three reminders at the address as mentioned below:

(a) For shares in physical form, reminders shall be sent to the address given in the application form as well as last available address as per listed entity’s record.

(b) For shares in demat form, reminders shall be sent to the address captured in depository’s database or address given in the application form, in case of application made in physical form.

C. Procedure in case of non receipt of response to reminders

(1) For shares in demat form, the unclaimed shares shall be credited to a demat suspense account with one of the Depository Participants, opened by the listed entity for this purpose.

(2) For shares in physical form, the listed entity shall transfer all the shares into one folio in the name of “Unclaimed Suspense Account” and shall dematerialize the shares held in the Unclaimed Suspense Account with one of the Depository Participants.

(3) The listed entity shall maintain details of shareholding of each individual allottee whose shares are credited to such demat suspense account or unclaimed suspense account, as

applicable.

(4) The demat suspense account or unclaimed suspense account, as applicable shall be held by the listed entity purely on behalf of the allottees who are entitled to the shares and the shares held in such suspense account shall not be transferred in any manner whatsoever except for the purpose of allotting the shares to the allottee as and when he/she approaches the listed entity.

Provided that all such shares, in respect of which unpaid or unclaimed dividend has been transferred under Section 124 (5) of the Companies Act, 2013, shall also be transferred by the listed entity in accordance with Section 124 (6) of the Companies Act, 2013 and rules made thereunder.

D.Procedure in case of claim by allottee

(1) As and when the allottee approaches the listed entity, the listed entity shall, after proper verification of the identity of the allottee either credit the shares lying in the Unclaimed Suspense Account or demat suspense account, as applicable, to the demat account of the allottee to the extent of the allottee’s entitlement, or deliver the physical certificates after re-materialising the same, depending on what has been opted for by the allottee:

Provided that the rematerialising of the physical certificates shall be done only in case where the shares were originally issued in physical form.

E. Dealing with Corporate Benefits (in terms of securities accruing) and Voting Rights on such Unclaimed Shares

(1) Any corporatebenefitsintermsofsecuritiesaccruingonsuchsharesviz.bonusshares,split etc., shall also be credited to such demat suspense account or unclaimed suspense account, as applicable for a period of seven years and thereafter shall be transferred by the listed entity in accordance with provisions

of Section 124(5) read with Section 124 (6) of the Companies Act, 2013 and rules made thereunder.

(2) The voting rights on such unclaimed shares shall remain frozen till the right ful owner claims the shares

Details of IEPF Forms

Forms	Purpose of the Form	Relevant Rules	Time limit	An Oversight
IEPF Form -1	Statement of amounts credited to Investor Education and Protection Fund	Rule 5(4) of the IEPF Rules, 2016] Section 125(2) Clause (a) to (n)	w/i 30 Days of such amounts becoming due to be credited to the Fund	After transfer of Amount of Dividend to IEPF
IEPF Form -2	Statement of unclaimed and unpaid amounts	Section 96  & Section 125(2)	w/i 90 Days of AGM	An annual statement of the amounts transferred to IEPF
IEPF Form -3	Statement of shares and unclaimed or unpaid dividend nottransferred to the Investor Education and Protection Fun	Section 124(6) Rule 18(3) of IEPF Rules, 2016	w/i 30 days from the end of financial year	Details of shares and unclaimed or unpaid dividend not transferred to IEPF
IEPF Form -4	Statement of shares transferred to the Investor Education and Protection Fun	Rule 6(5) of IEPF Rules, 2016	w/i 30 days of such shares becoming due to be transferred to the Fund.	If Company transferred unpaid and unclaimed dividend to IEPF, then also transfer such shares to the IEPF.
IEPF Form -5	Application to the Authority for claiming unpaid amounts and shares out of Investor Education and Protection Fund (IEPF)	Rule 7(1) and Section 125(3)	(one form for one FY)	To claim unpaid amounts and Shares from IEPF *Click here for details and procedure
IEPF Form -6	Statement of unclaimed or unpaid amounts to be transferred to the Investor Education and Protection Fund	Rule 8	w/i 30 days of end of financial year	1.  Amounts due to be transferred to the Fund in next financial year 2. Authority shall furnish a report to the CG w/i 60 days of end of f.y. giving details of companies who have failed to transfer the due amount to the Fund.
IEPF Form -7 (Updated 25.05.2018)	Statement of amounts credited to IEPF on account of shares transferred to the fund	Rule 6(13) of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016	w/i 30 Days of such amounts becoming due to be credited to the Fund	Remittance of any amount by company toward IEPF funds shall be reported to MCA within 30 days from date of remittance in Form IEPF-7

You may ping for any professional guidance in filing of any Form related to IEPF 

 (http://www.iepf.gov.in/IEPFA/corporates.html)

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Thanks & Regards                       

Ravi Garg                                    

Company Secretary                    

91-7838204665,
csravi2014@gmail.com

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