Investor Education and Protection Fund | Complete Overview

DEEPAK SETH , Last updated: 26 August 2020
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(1) The Central Government shall establish a Fund to be called the Investor Education and Protection Fund (herein referred to as the Fund).

(2) There shall be credited to the Fund -

(a) the amount given by the Central Government by way of grants after due appropriation made by Parliament by law in this behalf for being utilised for the purposes of the Fund;

(b) donations given to the Fund by the Central Government, State Governments, companies or any other institution for the purposes of the Fund;

(d) the amount in the general revenue account of the Central Government which had been transferred to that account under subsection (5) of section 205A of the Companies Act, 1956 (1 of 1956), as it stood immediately before the commencement of the Companies (Amendment) Act, 1999 (21 of 1999), and remaining unpaid or unclaimed on the commencement of this Act;

(e) the amount lying in the Investor Education and Protection Fund under section 205C of the Companies Act, 1956;

(f) the interest or other income received out of investments made from the Fund;

(g) the amount received under sub-section (4) of section 38;

(h) the application money received by companies for allotment of any securities and due for refund;

(i) matured deposits with companies other than banking companies;

(j) matured debentures with companies;

(k) interest accrued on the amounts referred to in clauses (h) to (j);

(l) sale proceeds of fractional shares arising out of issuance of bonus shares, merger and amalgamation for seven or more years;

(m) redemption amount of preference shares remaining unpaid or unclaimed for seven or more years; and

(n) such other amount as may be prescribed:

Investor Education and Protection Fund Complete Overview

Comment: No such amount referred to in clauses (h) to (j) shall form part of the Fund unless such amount has remained unclaimed and unpaid for a period of seven years from the date it became due for payment.

(3) The Fund shall be utilised for -

(a) the refund in respect of unclaimed dividends, matured deposits, matured debentures, the application money due for refund and interest thereon;

(b) promotion of investors' education, awareness and protection;

(c) distribution of any disgorged amount among eligible and identifiable applicants for shares or debentures, shareholders, debenture-holders or depositors who have suffered losses due to wrong actions by any person, in accordance with the orders made by the Court which had ordered disgorgement;

(d) reimbursement of legal expenses incurred in pursuing class action suits under sections 37 and 245 by members, debenture-holders or depositors as may be sanctioned by the Tribunal; and

(e) any other purpose incidental thereto,

in accordance with such rules as may be prescribed:

Comment: The person whose amounts referred to in clauses (a) to (d) of sub-section (2) of section 205C transferred to Investor Education and Protection Fund, after the expiry of the period of seven years as per provisions of the Companies Act, 1956 (1 of 1956), shall be entitled to get refund out of the fund in respect of such claims in accordance with rules made under this section.

Comment: The disgorged amount refers to the amount received through disgorgement or disposal of securities.

(4) Any person claiming to be entitled to the amount referred in sub-section (2) may apply to the authority constituted under sub-section (5) for the payment of the money claimed.

(5) The Central Government shall constitute, by notification, an authority for administration of the Fund consisting of a chairperson and such other members, not exceeding seven and a chief executive officer, as the Central Government may appoint.

(6) The manner of administration of the Fund, appointment of chairperson, members and chief executive officer, holding of meetings of the authority shall be in accordance with such rules as may be prescribed.

Note: Sub-Section (6) is Notified - except with respect to the manner of administration of the Investor Education and Protection Fund.

Note: Manner of administration of the Investor Education and Protection Fund has been notified on 7th September, 2016

(7) The Central Government may provide to the authority such offices, officers, employees and other resources in accordance with such rules as may be prescribed.

(8) The authority shall administer the Fund and maintain separate accounts and other relevant records in relation to the Fund in such form as may be prescribed after consultation with the Comptroller and Auditor-General of India.

(9) It shall be competent for the authority constituted under sub-section (5) to spend money out of the Fund for carrying out the objects specified in sub-section (3).

(10) The accounts of the Fund shall be audited by the Comptroller and Auditor-General of India at such intervals as may be specified by him and such audited accounts together with the audit report thereon shall be forwarded annually by the authority to the Central Government.

(11) The authority shall prepare in such form and at such time for each financial year as may be prescribed its annual report giving a full account of its activities during the financial year and forward a copy thereof to the Central Government and the Central Government shall cause the annual report and the audit report given by the Comptroller and Auditor-General of India to be laid before each House of Parliament.

IEPF Compliance Checklist for a Financial Year

Updated as per Section 125 of Companies Act, 2013 and Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.

S. No.	Particulars of compliance	Timelines
1	Form IEPF-3	Within 30 days of the end of the Financial Year
2	The Company shall inform the shareholders regarding the transfer of shares to IEPF Authority	3 months before the due date of transfer of such shares to IEPF Authority
3	Publish a notice in the leading newspaper in English and regional language informing that the names of such shareholders and their folio no. or DPID-Client ID are available on the website of the Company	3 months before the due date of transfer of such shares to IEPF Authority
4	Form IEPF-7	Within 30 days of remitting the dividend to the IEPF Authority. Also, to be filed within 30 days of remitting the payment to the authority in case the company gets delisted or wound up.
5	Dividend shall be paid or claimed	Within 30 days from the date of declaration of dividend
6	Amount of dividend still unpaid or unclaimed shall be deposited in UNPAID DIVIDEND A/C.	Within 7 days from the expiry of above 30 days mentioned in point 5.
7	Any amount remaining unpaid or unclaimed for the period of 7 years from the date of such transfer, shall be transferred by the company to the IEPF Authority	Amount to be paid via online mode within 30 days of amounts due to be credited to the fund
8	Form IEPF-1 and statement in excel template	To be filed while remitting the amount of unpaid dividend via online mode to IEPF Authority
9	Form IEPF-2	Filing of details of appointment of Nodal Officer or Deputy Nodal Officer with IEPF Authority.
10	Form IEPF-2 - Details of amount transferred to IEPF Authority in Form IEPF-1	To be filed within 60 days of AGM or the date on which it should have been held, whichever is earlier.
11	Disclosures on website	Every company shall within a period of 60 days after the holding of AGM and every year thereafter till completion of the seven years, identify the unclaimed amounts, as referred in sub-section 2 of section 125 of the Act, as on the date of holding of Annual General Meeting or the date on which it should have been held as per the provisions of section 96 of the Act, separately furnish and upload on its own website and also on website of Authority or any other website as may be specified by the Government, a statement or information through Form No. IEPF-2, separately for each year containing the following information: a) Names & Last known addresses of persons entitled to receive the sum (b) Nature of amount (c) The amount to which each person is entitled (d) Due date for transfer to IEPF
12	All the shares in respect of which dividend has not been paid or claimed for 7 consecutive years shall be transferred and credited to the DEMAT account of IEPF Authority	Within 30 days of such shares becoming due to be transferred to IEPF Authority
13	Form IEPF-4	within 30 days of transfer of shares to the Authority
14	Statement containing names, last known addresses and unpaid dividend to be paid to each person	To be placed on the website of the Company, if any, within 90 days of making transfer to UNPAID DIVIDEND A/C and also on any other website as approved by the Central Government for this purpose as may be prescribed
15	Form IEPF-5	Any shareholder can claim the unclaimed dividend and shares by filing form IEPF-5. After successful submission of FORM IEPF-5 by the shareholder, it shall be directly transmitted online to the Company for verification.
16	To send e-verification report along with scanned documents sent by the claimant to IEPF Authority.	Company shall file an e-verification report in a specified format along with scanned documents, to IEPF Authority, within 30 days of receipt of online IEPF-5.
17	The company shall maintain record consisting of name, last known address, amount, folio number or client ID, certificate number, beneficiary details, etc. of the persons in respect of whom unpaid or unclaimed amount has remained unpaid or unclaimed for a period of seven years and has been transferred to the Fund and the Authority shall have the powers to inspect such records.

DISCLAIMER: THE ARTICLE IS BASED ON THE RELEVANT PROVISIONS AND AS PER THE INFORMATION EXISTING AT THE TIME OF THE PREPARATION. IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT AND INDIRECT RESULT FROM THIS ARTICLE. THIS IS ONLY A KNOWLEDGE SHARING INITIATIVE.