What is IEPF? Introduction, Reasons for Transfer, and Process of Claiming Explained

Shares are often bought, but many are never claimed or forgotten about. Money in these situations remains unclaimed for a long time. The Investor Education and Protection Fund (IEPF) was established by the Ministry of Corporate Affairs (MCA) to ensure that these unclaimed shares are transferred to and received by the appropriate individuals.

The purpose of this blog post is to explain why shares are transferred to the IEPF and how they can be claimed.

Introduction

The Investor Education and Protection Fund, or IEPF, was created on January 13, 2016, by the Central Government under Section 125 of the Companies Act 2013 to protect and educate investors. Contributions to the IEPF come from various sources, including unclaimed dividends, matured deposits, and other business assets. These funds are then used to support investors who have lost money due to dishonest business practices. 

Why are shares transferred to IEPF?

Many businesses that turn a profit pay dividends to their owners. Shares that have not been claimed by the holder for seven years get transferred to the IEPF. Owing to this inactivity, the company’s legislation requires it to transfer the shares to the IEPF, along with any outstanding interest. 

This transfer protects their interests by preventing the investor from losing shares due to inactivity in their account. The shareholder has full right to reclaim their share from the authorities.

Reasons why the holder may not claim dividends

1.  It is not possible for you to receive the dividend if you misplace the shares you own or forget the details of your ownership. 

2.  Legal hires cannot claim assets in the event of a holder’s death if the nominees are unaware of them. 

3.  You will not be entitled to the dividend the firm declares if your investment records are incomplete. 

4.  The company will not be able to transfer the dividend to the shareholder if the shareholder’s registered bank account has changed over time and has not been updated with the firm.

Who can claim shares from IEPF?

Any shareholder whose unclaimed dividends and shares have been transferred to IEPF can claim their shares from IEPF. There is a limit of one consolidated claim per corporation per fiscal year. Before filing the claim with IEPF, the claimant must make sure the company has completed the share transmission procedure and issued an entitlement letter.

Amounts credited to IEPF

1.  If not claimed by the holder, the unpaid dividend amount is transferred to IEPF.

2.  The interest and other income received from investments are transferred to IEPF.

3.  The redemption amount received from the preference shares remained unclaimed for more than 7 years.

4.  The proceeds received by the IEPF from fractional shares sold as part of bonuses, mergers, and acquisitions.

Utilization of IEPF Amount

The IEPF authority can only utilize the amount lying with them for the below-mentioned purposes.

1.  The fund can be utilized towards promoting investor awareness programs.

2.  Making refunds regarding matured deposits, debentures, and unclaimed dividends to their holders.

3.  The National Company Law Tribunal has sanctioned the reimbursement of legal expenses incurred in suits against debenture holders, members, or depositors.

4.  Any other purpose incidental to the purpose mentioned above.

Process to get shares from IEPF

The process to claim the shares from IEPF authorities is as follows:

1.  Online Application – First, you must fill out an online application form known as IEPF 5, which is available on the company’s official website, www.iepf.gov.in, under the head claimants. The form will ask you for your information, company details, etc.

2.  After completing and submitting the form, you will receive acknowledgement slips and the reference number.

3.  Physical Submission—Submit the acknowledgement slips along with essential documents such as the Indemnity Bond, Advance Stamped receipt, original shares, debt certificate, proof of entitlement, and Aadhaar card to the relevant authorities.

4.  Send all the documents to the Nodal Officer of the company at their registered office.

5.  The nodal officer will then verify your claim and send a verification report to IEPF within 15 days.

6.  Your claim will be processed once IEPF receives the verification report.

7.  After the company processes the claim, the stock will be transferred to the holder’s Demat account.

Conclusion

The Investor Education and Protection Fund (IEPF) is crucial for advancing financial literacy in India and protecting investors’ interests. In addition to distributing shares and unclaimed dividends to investor education and safety initiatives, the fund fosters a more transparent and accountable environment. 

Frequently Asked Questions (FAQs)

Q1. Why are shares transferred to IEPF?
Ans. Shares are transferred to IEPF because the shareholder failed to claim the company’s income and shares.

Q2. How can I check if I have any unclaimed dividends or shares lying with the IEPF?
Ans. You can search for unclaimed sums on the IEPF website by entering your name and PAN card information. 

Q3. How long does it take to get the shares back from IEPF?
Ans. It generally takes 30 to 60 days after completing the verification claim.

Q4. What does IEPF stand for?
Ans. IEPF stands for “Investor Education and Protection Fund”.

Q5. Which form needs to be filled to claim shares from IEPF?
Ans. To claim shares from IEPF, you must first fill out the IEPF 5 form. Once completed, print the acknowledgement receipt and send it to the company’s nodal officer. 

Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.