By Mr. Sanchit Garg, Co-Founder of GLC Wealth
To help the investors or legal heirs reclaim their unclaimed shares and dividends, the Finance Minister announced during the Union Budget 2023 that the government will establish an integrated IT portal for the Investors Education and Protection Fund (IEPF) Authority. Declaring the formation of the new portal, the Finance Minister noted that the move will significantly bolster investors’ protection, ease the process for investors to claim their unclaimed shares or dividends, and make the overall financial sector more robust and transparent.
What are unclaimed dividends & shares?
An unclaimed dividend is a dividend that has been paid by the company but it is yet to be claimed by the shareholders. This can happen for a variety of reasons, such as if the shareholder has not updated the address in the company’s records & has not received the dividends, the bank account is not updated in the company’s records, the shareholder has passed away, the name mismatch & many more such reasons.
If the dividends for shares are not claimed for 7 consecutive years then the shares are also transferred to the unclaimed suspense account and then to the IEPF account. This can also happen for a multitude of reasons like change of address, investor moving abroad, death of investors, loss of share certificates, name mismatch issues, etc.
Investors Education and Protection Fund (IEPF)
To promote awareness among investors of their unpaid dividends and unclaimed shares, the government conceptualized the Investors Education and Protection Fund (IEPF) in 2016 under the Ministry of Corporate Affairs. The primary aim of the government was to curb the misuse of shares lying unclaimed and promote and protect the shareholders’ interests.
It is noteworthy to point out that the corpus of unclaimed dividends for the listed companies stood at a staggering Rs 5685 crores and a staggering 117 Crores of unclaimed shares have been transferred to the IEPF which could be worth around Rs 50,000 Crores today as per current market prices.
Currently, to claim back shares & dividends from the IEPF, claimants have to file the claim online by filling out IEPF Form 5 & then submitting the hard copy of the documents to the Nodal Officer of the concerned company. This complete process involves follow-ups with the Company, its Registrar and transfer Agents (RTAs) & the IEPF authority and claimants face several issues due to a lack of clear information/knowledge about the process & documentation, dealing with multiple parties & no single platform to track the claim. To ease the process, the IEPF Authority recently introduced a “Consultation Paper on refund process at IEPF Authority” to seek feedback and suggestions from all stakeholders and also proposed an Integrated IT Portal for IEPF.
Integrated IT portal for IEPF
The move announced by the government to set up an integrated IT portal will further ease the process of reclaiming unclaimed shares and unpaid dividends. Shareholders who have not claimed their dividends or shares for the last seven years can check the IEPF IT portal to see if their unclaimed dividends or shares have been transferred to the IEPF. They can then claim their shares or dividends directly through the portal by following the prescribed procedure. It will also enable investors to check the status of their claims in real time and the companies to comply with any discrepancies raised by the government. Further, there is a likelihood that claims below a certain value will be approved on a straight-through process.