Ministry of Corporate Affairs sends notices to 4,000 firms over unclaimed shares

The Ministry of Corporate Affairs (MCA) has sent close to 4,000 notices to the listed companies which have not transferred investors' unclaimed shares, unpaid dividend or matured deposits of investors to Investor Education & Protection Fund (IEPF), sources said.

As per the IEPF Rules 2017, the shares in respect of which dividend has not been paid or claimed for seven or more consecutive years or more have to be transferred by the company to the IEPF Authority.

Apart from shares, the unpaid amounts that are required to be transferred to IEPF also include unpaid or unclaimed dividends lying in the unpaid dividend, mature deposits with companies other than banking companies along with accrued interest, matured debentures with companies along with interest accrued, sale proceed of fractional shares, redemption amount of preference shares and unpaid or unclaimed application money received by companies for allotment of shares and due for refunds.

"We have called for information from the companies which have not transferred investors' unclaimed shares or unpaid dividends to the IEPF. We will study the reasons for non-compliance and take further action against the erring firms," a senior official said, adding that more such companies will be identified in the next phase.

The shares have been lying unclaimed mainly due to loss of share certificates, heirs not aware of inheritance while in some cases shareholders have forgotten about their investments.

So far, 1,355 companies have transferred over Rs 19,000 crore worth of shares belonging to 29.5 lakh investors after the government in November last year made it mandatory for firms to transfer all the shares lying unclaimed with them for the past seven years to the IEPF.

Earlier, the unpaid and unclaimed dividend for seven years were required to be put in IEPF after the fund became operational in October 2001.

The fund has a total corpus of around 21,000 crore, of which about Rs 2,000 crore is largely dividend money while the remaining amount is on account of unclaimed shares transferred by the companies.

While the IEPF with a mandate of educating and protecting investors was set up in 2001 under the Companies Act, the refund provision was introduced only in September 2016, after notification of IEPF Authority (Accounting, Audit, Transfer & Refund) Rules 2016. Earlier, the rules didn't provide for refund or any claim from investors.

Under the provisions of Section 124 (6) of Companies Act, 2013, an investor can claim his or her shares back if the shares, unclaimed dividend, matured deposits or debentures, application money to be refunded and interest accumulated on the same, sale proceeds of fractional shares have been transferred to the IEPF. The claimants have to file IEPF Form-5 along with details of shares or dividends to be claimed and send it to the company. Within 15 days of receiving it, the company has to verify and send it to the IEPF Authority. The Authority has to dispose of the claim within 60 days.

IEPF Authority has so far received about 13,500 claims from investors. The number of claims is on the rise. About 1,500 claims are being filed every month, as per government data.

The refund process is, however, quite slow.

"About 15% of the total claims received so far have been processed. Others are in the process of getting finalised. Each claim first goes to the concerned company and after it is cleared by the company, the IEPF transfers the amount to the concerned investor," said another official.

"The awareness about the refund facility is also very low. We are holding awareness programmes mainly in small towns and cities to reach out to shareholders. Also the refund process takes a long time. We are in the process of simplifying the procedure for getting the refund," the official said.

HUGE KITTY

• Rs 19,000 crore Worth of shares transferred to the fund by 1,355 companies
   
• Rs 21,000 crore Total corpus of the fund, of which Rs 2,000 crore is dividend money