One fine day you discovered that your parents or grandparents had invested in physical shares of blue chip companies and their value is whopping now but you don’t know how to recover those shares. Then stick on to this blog to understand the process of recovering your shares or Money.
Many people invest in shares and forget to claim them or their legal heirs may not be aware of the shares or the claiming process. Due to this, the total number of unclaimed shares lying with the government’s Investor Education and Protection Fund (IEPF) Authority has reached 1.15 billion, as per data shared in the Lok Sabha and there are new additions every year. It has more than doubled since 2017-18. Less than 2% of such shares with IEPF are claimed by the shareholders/ their legal heirs/nominee/successor.
Let’s dig into this issue from scratch. During our Parent’s & Grandparents’ era, the shares were issued and stored in physical form. Buying and selling of shares was a tedious process and required a lot of paperwork. This was before 1996, but now with time everything has changed and the share is held in Demat form and the buying and selling of shares are a click of a button away.
Though SEBI Mandated the De materialization of physical shares and also forbade the physical transfer of shares to avoid fraud and manipulation risk, we are still in the process of achieving full conversion of physical shares into Demat form. Dematerialisation is the process of transferring physical holdings into a digital form. This will improve the ease, convenience and safety of transactions for investors.
As per Investor Education and Protection Fund Authority Rules (IEPF), 2017 “A company should transfer the shares where the dividend has not been claimed or encashed for more than seven consecutive years to the IEPF along with interest accrued”. If a company has declared bonuses or split shares in the previous seven years, such claims will not be transferred to the IEPF. The bonus shares will remain with the owners of the company and the original shares are transferred to IEPF if no dividends have been claimed for the previous seven years.
Rule 7(1) of the Investor Education and Protection Fund Authority Rules, 2016 states that a shareholder whose:
- Unclaimed dividend & Shares,
- Unclaimed matured debentures & interest due on them
- Any unrealized matured time deposit proceeds of a company
which has been transferred to IEPF, can claim the refund of these amounts by applying the Form IEPF-5 to the IEPF Authority online along with the prescribed fees decided by the IEPF Authority periodically in consultation with the Central Government.
What is Investor Education and Protection Fund (IEPF)?
The Government of India constituted IEPF under the Ministry of Corporate Affairs on 7th September 2016. IEPF is constituted under the ambit of sub-section (5), (6) and (7) of Section 125 of the Companies Act 2013, which states the rules and regulations that are made for investors as well as companies related to IEPF. The main objective of IEPF is to protect the interest of investors and to avoid fraud and malpractice.
IEPF Authority administers the Investor Education Protection Fund (IEPF). The Authority revive dormant shares and makes a refund of unclaimed dividends, matured deposits or debentures. It is also responsible for spreading awareness among investors.
Who can recover the shares from IEPF?
A shareholder can claim the shares from IEPF by submitting Form IEPF-5 on the MCA(Ministry of Corporate Affairs) portal. In case of the death of the shareholder, the joint holder or legal heir or nominee can claim the shares.
Procedure to claim shares from the IEPF:
Step 1: The claimant should first ensure the share transmission procedure is completed by the company and issued an entitlement letter to him/ her before filing the IEPF claim with the authorities.
Step 2: Fill out Form IEPF-5 online with all the required details and submit it to the MCA site. Only one claim is allowed in a year, and if the Form is rejected for any of the reasons, then the claimant has to wait for the next year.
Form IEPF 5 must contain the followings:
- Details of the applicant
- Details of the company with CIN number
- Details of shares to be claimed
- Details of the total amount of Dividend to be claimed
- Details of securities/deposits made yearly.
- Aadhaar number or passport/OCI/PIO Card No. (in the case of NRI/foreigners)
- Bank account details (which is Aadhar linked, in case the applicant is not NRI/foreigner) for the purpose of refunding the claim amount
After the successful submission of the Form, you will receive an SRN number.
Step 3: After submitting the e-form, the claimant should send the same form and all the required documents to the Nodal officer or Registrar of the company for initiating the verification of the claim.
The following documents are required to be shared with the Nodal officer or Registrar of the company ;
- Claim form with the signature of the claimant and in case of joint holders than with signatures of all the joint holders.
- Copy of acknowledgement bearing SRN number duly attested by the claimant.
- Indemnity Bond with the claimant’s signature
- Advance Stamped Receipt
- original certificate of a refund of matured deposit or debenture, or bonds
- Aadhar Card of the claimant and in case of joint holders, Aadhar Card of all joint holders.
- PAN Card.
- Client Master List duly attested by the claimant.
- Share Certificate
- Proof of Entitlement
- Cancelled Cheque
- Passport, including OCI and PIO card in case of foreigners and NRI.
- If Joint Holder is deceased, then his death certificate.
- Other documents, if any.
Step 4: The company will deliver a verification report concerning authentication accepted or unaccepted to the Authority within 15 days of receiving the claim form,
Delay in submission of Report:
If the online verification report is not sent by the company within thirty days of the filing of the claim, a penalty of fifty rupees for the everyday subject to a maximum of two thousand and five hundred rupees is levied to the company. The company shall be liable to maintain the original documents submitted to it by the claimant and shall produce such documents whenever required.
If the company fails to submit a verification report of the claim, the company and its Nodal Officer shall be punishable as per the provisions of the act.
Step 5: After verification of the claimant’s entitlement and the verification report, the IEPF authority issues a sanction order for a refund of shares in the favor of the claimant. Then the shares will be credited to the claimant Demat account. The transfer is done within 60 days from the date of submission of the verification report by the company to the IEPF Authority. The claimant can also track the claim status over the IEPF website.
This article should not be construed as investment advice, please consult your Investment Adviser before making any investment decision.
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Also read: Do you have your Retirement plan in place?