Getting Back lost Shares or Dividend from IEPF – Difficulties / Challenges Faced While Making Claim

Corporate Law Compliance Advisory By - CA Bhavik Pandit

STATUTORY PROVISIONS FOR TRANSFER OF DIVIDEND AND SHARES TO IEPF:

Section 124 (5) of the Companies Act 2013 stipulates that any money transferred to the Unpaid Dividend Account of a Company 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 Investor Education and Protection Fund (IEPF) which is established under section 125 (1) of the Act.

Section 124 (5) of the Companies Act 2013 further stipulates that all shares in respect of which dividend has not been paid or claimed for seven consecutive years or more shall be transferred by the company in the name of Investor Education and Protection Fund. It further provides that any claimant of shares transferred to IEPF shall be entitled to claim the transfer of shares from Investor Education and Protection Fund.

HIDDEN TREASURE:

The IEPF has an accumulated corpus of around Rs 4,138 crore of unpaid dividend transferred to it. 1,355 plus Companies have also transferred 65.02 crore shares valued at Rs 21,232.15 crore.  Out of this corpus, so far, around only Rs 200 crore has been restored to the rightful claimants to whom the funds belong. (Source: www. economictimes.indiatimes.com April 2019).  Though the Investors’ rightful investment money in form of dividend and shares is lying with IEPF, the amount restored to the rightful claimant is even less than 1% of the corpus of dividend and shares. The majority of the claims are getting delayed or rejected for the incomplete submission of documents. Another reason for such extremely low claims is that the claimant cannot make more than one claim in a financial year and if the claim is rejected due to the incomplete or incorrect documents, the claimant has to wait for one year to make fresh claim again. The claimant can file only one consolidated claim for a company in one financial year against one Aadhaar Number. Even details of multiple Folios of one company need to be included in the consolidated claim. Due to this the value of the corpus with IEPF at present has increased multi fold.

PROCEDURE TO CLAIM REFUND OF SHARES / DIVIDEND:

The procedure to register claim of refund of shares and / or dividend seems very simple. However, the documents required to be submitted are not that simple as the claimant is required to prove his bonafide as the genuine claimant. The procedure to claim refunds to the claimants from the Funs as stipulated in Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 is as under:

Step 1:   Apply to the IEPF Authority by submitting an online application in Form IEPF 5 available on the website www.iepf.gov.in or on www.mca.gov.in along with fee specified by the Authority.

Step 2:   Upon submission, Form IEPF-5 gets transmitted online to the Nodal Officer of the Company for verification of claim. The Claimant after making an application in   Form IEPF-5 shall send original physical share certificate, original bond, deposit certificate, debenture certificate, as the case may be, along 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.

Step 3:   The company shall, within thirty days from the date of receipt of claim, send an online verification report to the IEPF Authority after verification of details in Form IEPF-5 along with all the documents submitted by the claimant and shall attach the scanned copy of all the original documents submitted by the claimant in physical form duly certified by its Nodal Officer along with the e-verification report along with a scanned copy of both sides of original physical share certificate or original bond or deposit or debenture certificate/s duly cancelled and certified.

If the verification report along with documents is not received by the IEPF Authority after the expiry of sixty days from the date of filing of   Form IEPF-5, the IEPF Authority may reject Form IEPF-5 filed by the claimant. Before rejecting the Form, IEPF Authority is required to send a communication to the claimant and the concerned company, on the e-mail address of the claimant and the company, to furnish response within a period of fifteen days. In case of the failure to submit verification report of the claim in accordance with the rules, the company and its Nodal Officer shall be punishable as per the provisions of the Act.

Step 4: An application received for refund of any claim under this rule duly verified by the concerned company shall be disposed off by the IEPF 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.

DIFFICULTIES / CHALLENGES FACED BY A CLAIMANT:

The above procedure like any other standard procedure of registering a claim seems quite simple yet very complex as it requires documents to prove that the claimant itself is the rightful and bonafide claimant. The claimant faces challenges in understanding the documentation required to be submitted for the claim. The requirement of documents depends on various scenario.

The Schedule II and III of the Schedule II -IEPF (Accounting, Audit, Transfer and Refund) Rules, 2016 stipulates the documents required to address various scenarios and challenges / difficulties faced by the claimant. However, the documents required are such that for a layman it is very difficult to fulfil the same to establish his rightful claim.

The shares are either held in physical forms or in the Demat  form. Majority of the shares transferred to IEPF are in physical forms. The claimant shareholders have lost track of their holding. While claiming their respective holding from IEPF, at every step of getting proper documents submitted, the claimant faces challenges. Some of the common difficulties faced by the claimants are as under:

1. Change of Name: The name of the claimant as per the record available with the Company and as per the KYC documents (AADHAR / PAN / Voter ID / Driving License etc.) is different. In case of change of name of the claimant, an affidavit to of the claimant affirming change of name supported by documentary evidence of publication of change of name in Official Gazette is needed.
2. Change of Address: The address of the claimant shareholder as per the record available with the Company and as per the address proof are different. In case of the change in address, an affidavit affirming the change of address along with self-attested address proof of the old address and the present address are needed.
3. Loss of Original Share Certificate: The Form IEPF 5 requires the original share certificate to be attached but the same is lost. The claimant is not aware of his folio number, certificate number, distinctive numbers. In case of loss of original shares held in physical mode, the following documents to be submitted to IEPF Authority as required by Schedule III of the Rules are:
   • Notarised copy of FIR/ Police Compliant containing information of security holder, holding details, folio number and distinctive numbers of share certificate.
   • Surety Affidavit of value equal to market value that of shares as on date of execution along with his Proof of identity like Pan Card of sureties duly attested by Notary. The Surety should not be a relative of the Claimant.
   • Indemnity bond by security holder on a non-judicial stamp paper of requisite value duly attested by Notary Public by the person, in whose name the original share certificate are being issued that he has not sold / disposed off the involved shares or acted in any manner by which any interest of third party would have been created.
   • Copy of advertisement issued in at least one English language national daily newspaper having nationwide circulation and in one regional language daily newspaper published in the place of registered office of company, if the market value of the shares is greater than Rs 10,000.
   • In case of loss of original physical share certificate or proof of entitlement, the company and the claimant shall follow the procedure as laid down in the Companies (Share Capital and Debenture) Rules, 2014 , the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulation, guidelines, procedures and circulars issued from time to time and Schedule III of these rules and attach certified copies of all documents as may be required under the said rules or guidelines with the e-verification report.
4. No Demat Account of the Claimant: The claimant is not having any Demat account as required for transfer of shares by IEPF Authority. The claimant is required to open Demat account and submit CML – Client Master Ledger duly attested by the depository.
5. Transmission of Shares: The claimant is a legal heir or successor or administrator or nominee of the registered share holder. Also, the legal heir do not have any clue of the original share certificate. The requirement of documents for shares held in physical mode or demat mode having value up to Rs. Two Lakh or more than Rs. Two Lakh is different. The claimant also has to ensure that the transmission procedure is completed by the company and an entitlement letter is issued to the legal heirs and then only file the IEPF Claim with the authority.

A. Documents to be submitted to the Authority to register transmission of securities held in physical mode – Where the shares are held singly with nomination:

1. Duly signed transmission request form by the nominee.
2. Original or copy of death certificate duly attested.
3. Self-attested copy of PAN card.
4. Original share certificate(s).
5. Any other government ID proof of the nominee.

B. Where the shares are held singly without nomination, the following documents in addition to the documents specified at paragraph A are required:

1. Affidavit from all the legal heirs made on appropriate non-judicial stamp paper- to the effect of identification and claim of legal ownership to the securities: Provided that in case the legal heir(s) or claimant(s) is named in the succession certificate or probate of will or Letter of Administration, an Affidavit from such legal heir(s) or claimant(s) alone would be sufficient.
2. For value of securities up to Rs. 2,00,000 (Rupees Two lakh only) per issuer company as on date of application, one or more of the following documents:
   • Succession certificate or probate of will or letter of administration or court decree, as may be applicable in terms of Indian Succession Act, 1925.
   • In the absence of the documents as mentioned at (a) above,
   • No objection certificate from all legal heir(s) executed by all the legal heirs of the deceased holder not objecting to such transmission (or) copy of Family Settlement Deed duly notarized and
   • An Indemnity bond made on appropriate non-judicial stamp paper – indemnifying the Share Transfer Agent (STA) or Issuer Company.
3. For value of securities more than Rs. 2,00,000 (Rupees Two lakh only) per issuer company as on date of application: Succession certificate or probate of will or letter of administration or court decree, as may be applicable in terms of Indian Succession Act, 1925.

C. Where the shares are held jointly with nomination:

1. Duly signed transmission request form by the nominee.
2. Original or copy of death certificate(s) of all the joint holders duly attested
3. Self-attested copy of PAN card.
4. Original share certificate(s).
5. Any other government ID proof of the nominee.

D. Where the shares are held jointly without nomination, the following documents in addition to the documents specified at paragraph C are required:

1. Affidavit from all the legal heirs made on appropriate non-judicial stamp paper- to the effect of identification and claim of legal ownership to the securities. Provided that in case the legal heir(s) or claimant(s) is named in the succession certificate or probate of will or Letter of Administration, an Affidavit from such legal heir(s) or claimant(s) alone would be sufficient.
2. For value of securities up to Rupees Two lakh per issuer company as on date of application, one or more of the following documents:
   • Succession certificate or probate of will or letter of administration or court decree, as may be applicable in terms of Indian Succession Act, 1925.
   • In the absence of the documents as mentioned at (a) above
     • No objection certificate from all legal heir(s) executed by all the legal heirs of the deceased holder(s) not objecting to such transmission (or) copy of Family Settlement Deed duly notarized and
     • An Indemnity bond made on appropriate non-judicial stamp paper – indemnifying the STA or Issuer Company.
3. For value of securities more than Rs. Two lakh per issuer company as on date of application: Succession certificate or probate of will or letter of administration or court decree, as may be applicable in terms of Indian Succession Act, 1925.

CLAIM APPROVAL:

Once the claim is approved, for a monetary refund (of dividend) , IEPF initiates e-payment as per the rules. If shares are reclaimed, the shares will be credited to the claimant’s Demat account by the Investor Education and Protection Fund.

CONCLUSION:

The preparation of documentation required based on various scenarios and possibilities is complicated for a common investor. Depending on the case to case, required documents needs a detailed understanding whether it is an affidavit or an indemnity or surety or succession certificate or otherwise. Also the claimant should always ensure that the form IEPF he is submitting is complete in all sense, is supported by all the documents as may be required else his claim will either get delayed or rejected. And once the claim is rejected, the claimant has to wait for another financial year as he can make only one claim in a year for a specific security.

For any assistance or guidance or query related to Transmission of shares after death of an original shareholder, Transfer of physical shares, Recovery of lost shares and issue of duplicate shares, Claim of shares from IEPF, Claim of dividend from IEPF, Ensuring resolution of Investor’s grievance, write us at info@sharmaandpagaria.com