Transfer of Shares - Investor Education and Protection Fund

 As per Section 124(6) of the Companies Act, 2013, every company is mandatorily required to transfer the underlying shares for which the dividend has remained unpaid or unclaimed for a consecutive period of seven years to the Investor Education and Protection Fund.

The foremost condition for transfer of shares is that the dividend on such shares shall be unpaid or unclaimed for seven consecutive years.

As per rule 6 of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer, and Refund) Rules, 2016, the shares shall be credited to DEMAT Account opened by the Investor Education and Protection Fund Authority within thirty days of such shares becoming due to be transferred to the Investor Education and Protection Fund (IEPF).

Considering that the due date for transferring shares on which dividend has remained unpaid and unclaimed during the period from 7^th September 2016 to 31st October 2017, all the transfer formalities should be completed within 30th November 2017.

Pursuant to the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer, and Refund) Second Amendment Rules, 2019, it is clarified that shares in respect of which dividend has been transferred to IEPF on or before 7th September 2016, shall also be transferred by the company in the name of IEPF.

Timeline and Filing of IEPF form w.r.t transfer of shares:

Particular	Timeline	E-form
Declaration of dividend in the general meeting by shareholders	X days
Transfer of the amount declared to a separate bank account	Within X+5 days
Payment of Dividend to the shareholder	Within X+30 days
Where the dividend is declared but not claimed within 30 days from the declaration, then transfer unclaimed/unpaid amount to an Unpaid Dividend Account	Within X +30+7 days
Transfer remaining unclaimed/unpaid in Unpaid Dividend Account including shares to IEPF	Within 30 days After (X+30+7) days + 7 years
Transfer shares whose dividend is unclaimed/unpaid in Demat account of the IEPF Authority	Within 30 days of (X+30+7) days + 7 years + 30 days
Statement of shares and unclaimed or unpaid dividends not transferred to the Investor Education and Protection Fund	Within 30 days from the end of the financial year.	IEPF Form-3
Statement of shares transferred to the Investor Education and Protection Fund	Within 30 days of the corporate action containing details of such transfer	IEPF Form-4
Application to the Authority for claiming unpaid amounts and shares out of Investor Education and Protection Fund (IEPF)	No timeline prescribed	IEPF Form-5
Statement of amounts credited to IEPF on account of shares transferred to the fund	No timeline prescribed	IEPF Form-7

Brief Procedure to transfer shares to IEPF Demat Account :

1)     Company shall inform the shareholder concerned regarding the transfer of shares three months before the due date of transfer of shares to IEPF. Such details shall also be posted on the website of the company.

2)   Simultaneously, Company to publish a notice in a leading newspaper in English and regional language having wide circulation informing the concerned that the names of such shareholders and their folio Number or DP ID and Client Id are available on their website duly mentioning the website address.

 

Transferring of Demat shares :                        

3)  Companies are required to inform their depository by way of a corporate action where the shareholders have their account and thereafter the depository shall effect transfer in favor of the Demat account of the IEPF

 

Transfer of physical shares :

 

4)    For effecting transfer of shares held in physical form, the following steps are to be taken by the company:

• Company to authorize the CS or any other person to make an application on behalf of the shareholder, for issuance of new share certificates;
• Company will then on an application made by such authorized person, issue new share
• certificates specifically stated on the face of it that the share certificate is “Issued in lieu of share certificate no. ……for the purpose of transfer to IEPF”;
• Recording the particulars in the register maintained for that purpose which shall be as per
• Register of Members or any separate register maintained for that purpose;
• Company to inform the depository by way of a corporate action to convert the new share certificates into Demat form and transfer in favor of the IEPF Authority.

 Penalty in case of default in transferring of shares to IEPF Fund:

As per section 124 (7) of the Companies Act, 2013, in case a company makes a default in transferring shares to the IEPF Fund, such company shall be liable to a penalty of one lakh rupees and in case of continuing failure, with a further penalty of five hundred rupees for each day after the first during which such failure continues, subject to a maximum of ten lakh rupees and every officer of the company who is in default shall be liable to a penalty of twenty-five thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees.