Blog

Investing money in various financial instruments such as stocks, bonds, mutual funds, and other securities can help generate substantial returns over time, along with the potential to receive passive income through dividends. Investors get much more calculative while investing because, at a point in time, they will be expecting a handsome return from their investments. However, in some cases, the dividends accruing on these investments remain unpaid because of various reasons, such as when a company declares a dividend but is unable to send it to the shareholders due to incorrect mailing addresses, lost cheques, or failure on the part of shareholders to encash the dividend cheques. In some cases, shareholders may not get the credit of dividends to their bank accounts in the first place because of changes in their bank account details or the accounts becoming dormant.

Unclaimed shares can occur if a shareholder forgets about their investments, passes away without leaving clear instructions for their heirs, or fails to update their contact information with the company because of which they don’t get the dividends. In some cases, the shareholders may not even be aware that they own shares in a particular company due to various corporate actions. In both cases, the company is required to hold the unclaimed dividends and shares in trust for the shareholder. These unclaimed dividends are then transferred to the Investor Education and Protection Fund (IEPF) account, which is managed by the Ministry of Corporate Affairs.

The IEPF Authority was established by the government under the Companies Act 2013 to promote investor education and awareness, as well as protect the interests of investors. Its significance can be highlighted by the fact that by the end of the Financial Year 2022, it is safeguarding unclaimed dividends of listed companies to the tune of a staggering Rs 5685 crores and a staggering ~ 117 Crores of unclaimed shares have been transferred to the IEPF Authority.

As per Section 125 (2) (c) and Rule 7 (1) of the Investor Education and Protection Fund Authority of the Companies Act 2013, companies should transfer the amount of the unpaid dividends to the IEPF Authority’s account. According to the IEPF rules, shareholders can claim amounts by submitting the IEPF-5 Form for unclaimed dividends, matured debentures, matured deposits, and shares, refundable application fees, interest on fractional share sale proceeds, preference share redemption proceeds, etc., that are unclaimed for a minimum period of 7 years.

Also, the IEPF maintains a database of unclaimed dividends and shares, and investors can claim such dividends and shares by following the prescribed process. The objective of the IEPF is to ensure that the unclaimed dividend amount is returned to the rightful owners and that their interests are protected.

During the recent Union Budget 2023 announcement, the Finance Minister emphasized the need for an efficient and streamlined process for investors to reclaim their unclaimed shares and unpaid dividends. As a result, an integrated IT portal will be established to make this process much easier and more convenient. This portal will enable shareholders to claim their unpaid or unclaimed shares/dividend amount through a simple and user-friendly procedure.

Process of getting money back from IEPF

If you have invested in a company’s shares and are facing difficulties in getting your investments back, you can follow the process below to recover your investments from the IEPF:

Step 1: Check the IEPF website

The first step is to go to the IEPF website, which is iepf.gov.in. On the homepage, click on the ‘Claim Refund’ tab to proceed. Then click on the “Upload eForms” link on the left side of the page which will take you to the MCA login page.

Step 2: Login on the MCA Portal

If you have a login ID, log in using the same on the MCA Portal click on “MCA Services” and then click on “IEPF-5”.

Step 3: Fill out the online Form

Next, you need to fill out the refund claim form online on the website. Provide all the required details, such as your name, address, PAN number, and bank details. Also, provide details of your investment, such as the company’s name and the dividends unclaimed.

Step 4: Attach Documents

Attach all the necessary documents, such as your PAN card, cancelled cheque, demat account client master list, and any other documents that prove your entitlement to the investment in the company.

Step 5: Submit the Form

After filling out the form and attaching the documents, submit it to the IEPF Authority. Once the form is submitted online, an SRN acknowledgment will be created, which can be used to track the status of your claim.

Step 6: Send physical documents to the Nodal Officer

After submission, print the form and send the physical copy duly signed with all supporting documents to the Nodal Officer of the Company.

Step 7: The company will file a Verification Report

Upon receipt of physical documents, the Nodal Officer of the company will verify the documents and send an online E-Verification Report with Approval to the IEPF Authority.

Step 8: The IEPF Authority will Approve

The IEPF Authority will verify your claim and may ask for additional documents or information if required. The verification process may take some time, and you may need to follow up with the authority for updates. After verification, the IEPF Authority will send an Approval email to the registered email ID of the claimant.

Step 9: Receive the Refund

If your claim is verified and approved, the IEPF Authority will initiate the refund process, and then your amount will be credited to your bank account and the shares to the Demat Account.

However, recovering unclaimed shares and unpaid dividends from the IEPF can be a challenging task for some shareholders, especially senior citizens, NRIs, and legal heirs of deceased shareholders for which shareholders might need the assistance of a professional who has the requisite domain knowledge.

Moreover, shareholders can avail of various recovery advisors who offer services including issue of duplicate shares, issue of succession certificates, undertaking name deletion, and claim from IEPF. By providing such services, companies aim to simplify the process for shareholders and ensure that they can reclaim their rightful share of unclaimed dividends and shares without any hassle.