Various Timelines Under The Companies Act, 2013 for IEPF Compliances

31 December 2021 • Shawant Raj

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Various Timelines Under The Companies Act, 2013 for IEPF Compliances

31 December 2021 • Shawant Raj

India has progressed to the point that its citizens are financially literate and actively trade in equities through stock exchanges. As a result, it is prudent for investors to understand their rights. Given the large number of shareholders, every company faced the difficult responsibility of educating all of its shareholders. To simplify this awareness, the Indian government established a body dedicated only to investor protection and education. The unclaimed cash is deposited into the IEPF account formed by the Government of India. According to the provisions of the Companies Act, 2013, after a specified period, the unclaimed amount gets transferred into the IEPF account created by the Government of India, from where the investors at large can claim their unclaimed dividend. The central government has carved out specific IEPF compliances for transfer and claim applicable to companies and investors, and the body that has been formed to oversee this compliance has disregarded the IEPF compliances. We have attempted to carve out the core IEPF compliances applicable in this blog.

First, let us understand the concept of Investor Education and Protection Fund (IEPF)

IEPF is for promotion of investors’ awareness and protection of their interest.The Government of India has established IEPF Authority on 07thSeptember, 2016 under the provisions of Section 125 of the Companies Act, 2013(“the Act”) which deals with IEPF compliances.

The Authority is mandate to promote Investor’s Education, Awareness and Protection and have the duty to administer the Fund for Investor Education and Protection. This includes making refunds of shares, unclaimed dividends, matured deposits/debentures etc. to investors that have been transferred to IEPF.

Also, a new portal,i.e, www.iepfportal.in has been established which provides procedures and information for claiming refund by investors. In addition, a search facility has also been provided on the website for unclaimed amount that have beentransferred to IEPF. Various statutory e-Forms,which are required to be filed by the companies on MCA 21 platform, have been made available on this website and also, shall be discussed briefly in this write-up.

Chapter VIII Declaration and Payment of Dividend of The Companies Act, 2013, read with The Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (“the rules”) as amended time to time are the applicable provisions on declaration and payment of dividend including its transfer to Unpaid Dividend Account and Investor Education and Protection Fund.

What amounts are required to be transferred to IEPF, and is the Company obliged to do so?

IEPF is maintained under theConsolidated Fund of India(constituted under Article 266 of the Indian Constitution). Pursuant to section 125 of the Act read with Rule 3 of the Rules, following amounts which have remained unclaimed for a period of seven years are inter-alia required to be transferred to IEPF:

  • Unpaid or unclaimed Dividend lying in the unpaid dividend account,
  • Matured deposits with companies other than banking companies along with accrued interest,
  • Matured debentures with companies along with interest accrued,
  • Sale proceeds of fractional shares, redemption amount of preference shares,
  • Unpaid or unclaimed application money received by companies for allotment of shares and due for refund, etc.

How does the company declare dividend, and what if the declared dividend has not been claimed or paid to the shareholders by the company? Are there any deadlines to transfer the unclaimed Dividend to IEPF?

The journey of a dividend until it is transferred to the IEPF is articulated below.

Declaration of dividend / interim dividend at the General Meeting / Board Meeting

Amount of dividend shall be deposited with separate bank account with the ScheduledBank Within 5 days from the date of declaration.

Dividend shall be paid to or claimed by the shareholders within 30 days from the date of declaration.

If amount still Unpaid or Unclaimed, then it shall be deposited in UNPAID DIVIDEND ACCOUNT Within 7 days from the expiry of above 30 days.

If company fails, then liable to pay interest @ 12% p.a.

A statement containing the names, addresses and unpaid dividend to be paid to each person, shall be prepared and placed on the website of the Company, if any, within 90 days of making transfer to UNPAID DIVIDEND ACCOUNT

It shall also be placed on any other website approved by the Central Government for this purpose.

If amount still Unpaid or Unclaimedthen it shall be Deposit with IEPF U/S 125 Within 30 days after the expiry of 7 years from the date it was transferred to UNPAID DIVIDEND ACCOUNT.

 

For detailed procedural aspect of declaration of dividend, refer to our blog on Dividend: Regulatory Framework.

In contexts of the companies’ obligations to file various statutory e-Forms related to IEPF compliances on the MCA 21 platform, herein below is the list of e-Forms along with their purposes and deadlines. 

Sl. No. Particulars Deadlines Remark
1. e-Form IEPF-1

(Statement of amounts credited to Investor Education and Protection Fund)

Form No. IEPF 1 containing details of transfer to the Authority within a period of 30 days of amounts becoming due to be credited to the Fund. Any Amount required to be credited by the companies to the Fund shall be remitted onlinewithin 30 days after the expiry of 7 years from the date of deposit in Unpaid Dividend Account. For detailed procedure refer to our blog on Transfer of Dividend to IEPF Procedural Aspects
2. e-Form IEPF-2

(Statement of unclaimed and unpaid amounts)

Form IEPF-2 shall be filed every year within 60 days of the Annual General Meeting (AGM) or the due date of AGM, whichever is earlier which shall contain investor wise details of unclaimed and unpaid amounts in respect of dividends, debentures, etc. It shall only be filed in case the company have unpaid and unclaimed amount for previous seven years including current year as on the date of closure of financial year the account of which areto be adoptedin that AGM.
3. e-Form IEPF-3

(Statement of shares and unclaimed or unpaid dividend not transferred to the Investor Education and Protection Fund)

Form IEPF-3 to be filed within 30 days from the end of financial year containing the details of shares not transferred to the Fund because of the restriction provided under sub rule 3(b) of rule 6 If there is any 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, the company shall not transfer such shares to the fund.
4. e-Form IEPF-4

(Statement of shares transferred to the Investor Education and Protection Fund)

Form IEPF-4 to be filed within 30 days containing the details of transfer of shares in respect of which dividend has not been paid or claimed for seven consecutive years or more. For procedural aspect of transfer of shares to IEPF refer to our blog on Transfer of Shares to IEPF Legality and Practicality.
5. e-Form IEPF-5

(Application to the Authority for claiming unpaid amounts and shares out of Investor Education and Protection Fund (IEPF)

Any person may claim the shares or apply for refund of unclaimed dividendby submitting an online application in Form IEPF-5 available on the website http://www.iepf.gov.in along with specified fee. As perRule 7(3), every company shall within 30 days of filling claim in IEPF-5, has to provide an online verification report. Form IEPF-5 may be cancelled if the online verification report is not received within 60 days of filling IEPF-5 to the Authority. After filling the Form, the person shall send original physical share certificatealong with Indemnity Bond, Advance Receipts, any other document as enumerated in Form No. IEPF-5, duly signed by him, to the Nodal Officer of the concerned company at its registered office for verification of the claim.
6. e-Form IEPF-7

(Statement of amounts credited to IEPF on account of shares transferred to the fund)

Form IEPF-7 to be filed within 30 days from the date of remittance containing statement of amounts credited to IEPF on account of shares transferred to the fund under sub-rule (10) (11) and (12) of Rule 6.

 

Some important parameters to keep in mind related to IEPF: – 

  • The company shall keep records consisting of names, etc. of persons in respect of whom amount has been transferred to the IEPF.
  • This article is emanated from Chapter VIII of the Companies Act, 2013 (i.e., Declaration and Payment of Dividend) read with the applicable rules made thereunder. Therefore, failure in compliance with any of the above requirements mentioned in this article shall be liable to punishment as prescribed under the Act.
  • You may also refer the FAQ by IEPF Authority, in case of further clarification required on IEPF procedural aspects.

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