TRANSFER OF SHARES TO IEPF AUTHORITY & RECENT AMENDMENTS
In this
piece of writing, we will discuss the concept and procedure for transfer of shares by the
Company to “Investor Education and Provident Fund”, a fund
established by Central Government under section 125 of the Companies act, 2013
for specific purpose and recent amendments by Central Government in Investor
Education and Protection Fund Authority (Accounting, Audit, Transfer and
Refund) Rules, 2016 (hereinafter further referred as IEPF Rules, 2016) issued
by MCA via Notification[1] dated 13th
October, 2017 and General circular[2] No
12/2017 dated October 16, 2017.
Prior to
this, Lets discuss about the
roots of this concept, which is arising from Section 124 of the
Companies Act, 2013: “Unpaid Dividend” which provides for transfer of unpaid/unclaimed dividend i.e dividend which
is not paid or claimed within
30 days from
its date of declaration, then the company within 7 days shall transfer such amount to a special account
namely “Unpaid Dividend Account” which will be opened by Company in a schedule
bank as per section 124(1) of the Act, 2013.
Further any
amount transferred to “Unpaid
Dividend Account” remains unpaid or unclaimed for a period of 7 years from date
of transfer, and then as per section 124 (5) same shall be transferred to
‘Investor Education and Provident Fund”, a fund established by Central
Government.
At last, pursuant to the provisions of section 124 (6) of the Companies Act, 2013 read with the
IEPF Rules, 2016 as amended from time to time, the Company is mandated to
transfer all the shares in the name of Investor Education and Provident Fund in
respect of which dividends have not been paid or claimed for seven consecutive
years or more.
The aforesaid procedure for transfer of
shares by the Company to “Investor Education and Provident Fund is explained
below in diagrammatic format for better understanding:
Please Note: For the removal of doubts it is
hereby clarified that in case any dividend is paid or claimed for any year
during the said period of seven consecutive years, the share shall not be
transferred to Investor Education and Protection Fund as per sub section 124
(6).
Question: Whether a shareholder, whose shares have
been transferred to IEPF, can claim back shares and whether he can attend
general meeting and vote thereat?
Answer:
Yes, a shareholder (even their legal heirs & representative) can
claim their shares transferred to IEPF by making an application in Form
IEPF-5 to IEPF authority.
(Refer first proviso of sub section (6) of
section 124 of the Act, read with Rule 7 of IEPF Rules, 2017)
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As
per MCA vide notification, following amendments have been carried in Investor
Education and Protection Fund Authority (Accounting, Audit, Transfer and
Refund) Rules, 2016:
in sub-rule (1) of Rule 6
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for the second proviso, the
following proviso shall be substituted, namely:
“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.”;
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in sub-rule (1) of Rule 6
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after the second proviso, the
following proviso shall be inserted, namely:—
“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.”
It
is to be treated as “Deemed
Transmission”
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in sub-rule(3) of Rule 6
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for clause (d), the following
clause shall be substituted, namely;—
‘(d)
For the purposes of effecting the transfer shares held in physical form-
(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.’;
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after sub-rule (12) of Rule 6
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the following sub-rules shall
be inserted, namely
“(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.”.
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after sub-rule (2) of Rule 7
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the following sub-rule shall
be inserted, namely:—
“(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.”;
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after sub-rule (3) of Rule 7
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the following proviso shall
be inserted, namely:—
“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.”;
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after Rule 7
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the following proviso shall
be inserted, namely:—
“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.”.
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PROCEDURE FOR TRANSFER OF SHARES BY THE COMPANY TO IEPF
AUTHORITY:
1.
Transfer of Shares by Company to IEPF Authority in DEMAT
Account, within 30 days of completion of 7 years of the date of Dividend transferred to the “Unpaid
Dividend Account’.
2.
Please note that:
a)
Shares will not be transferred, if beneficial owner has
encashed any dividend warrant during the
last 7 years.
b)
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.”; it means
that shares must be transferred within 30 days i.e till 30th
November, 2017.
3.
Board Resolution for authorising Company Secretary or any
person for giving effect to necessary acts required to be done for such
purpose.
4.
Concerned Shareholder to be informed of such transfer to IEPF
at 3 months before the due date of transfer of shares.
5.
Newspaper advertisement to be given, prescribing the
names of shareholders whose shares are proposed to be transferred and their
complete details pertaining to shares along with websites address of company.
6.
For effecting the transfer of shares:
a)
If in DEMAT form- corporate actions form to be filed with
depository
b)
Where shares are in physical form:
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.
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.
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.
c)
Company shall send a statement to the authority in IEPF
-4 Form containing details of such transfer while affecting such transfer.
SAMPLE
NOTICE GIVING EFFECT TO SUCH TRANSFER
NOTICE
Sub: Transfer
of Shares of the Company to DEMAT Account of IEPF Authority.
Pursuant
to the provisions of section 124 (6) of the Companies Act, 2013 read with the Investor Education and Protection Fund
Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 as amended from time to time, the
Company is mandated to transfer all the shares in the name of Investor
Education and Provident Fund in respect of which dividends have not been paid
or claimed for seven consecutive years or more.
In compliance with said Rules, the company
has communicated individually to the concerned shareholders whose shares are liable to be
transferred to the DEMAT account of IEPF Authority and also published in the
Notices in the ___________________(English Newspaper) and
______________(Vernacular language newspaper) respectively to the effect. The
company has also uploaded on websites www.__________________________under investors
section, the details of shareholders whose shares are liable to be
transferred to IEPF Authority. The Company shall take necessary steps to
transfer the concerned shares held by such shareholders in physical or DEMAT
form to the DEMAT account to the IEPF Authority within 30 days from the due
date i.e 30th November, 2017 in accordance with notification dated
13th October, 2017 and
General circular No 12/2017 dated October 16, 2017 issued by MCA.
The shareholder may please note that no
claim shall lie in against the company in respect of the shares and dividends
thereof credited to the Account of IEPF Authority. On transfer of the
dividends and shares to IEPF Authority, the shareholder may however claim the
same y making an application IEPF
Authority in Form IEPF-5 as per the procedure prescribed in the Rules.
In case the the shareholders and queries on
the subject Matter, they may contact the company Registrar and Transfer
Agent_______________________________________________________________________________________________________________(at
given details)
For_______________________________
(Company
Secretary/Authorised Person)
Date :
Place:
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DISCLAIMER: The entire contents of this document have
been developed on the basis of relevant information and are purely the views of
the authors. Though the authors have made utmost efforts to provide authentic
information however, the authors expressly disclaim all or any liability to any
person who has read this document, or otherwise, in respect of anything, and of
consequences of anything done, or omitted to be done by any such person in
reliance upon the contents of this document. READER SHOULD SEEK
APPROPRIATE COUNSEL FOR YOUR OWN SITUATION. AUTHOR SHALL NOT BE HELD LIABLE FOR
ANY OF THE CONSEQUENCES DIRECTLY OR INDIRECTLY.
(Author-CS
Anjali Gorsia, Company Secretary from Nagpur (Maharashtra) and can
be contacted at csanjali.gorsia@gmail.com)
