NEW LAW FOR REMOVING TIME LIMIT ON DIVIDEND CLAIM

The new company law proposes to remove the time limit for claiming dividend. The Companies Bill 2008 – recently cleared by the Cabinet and to be placed before Parliament soon – has removed the seven-year ceiling up to which unclaimed dividend remains safe in the government’s kitty. This means investors can claim their dividend even 10 years after declaration of dividend once the new Bill gets the approval of Parliament. Unclaimed dividend of investors is transferred to the Investor Education and Protection Fund (IEPF). The fund, which is maintained by the ministry of corporate affairs, allows claims only for seven years from the date of declaration of dividend. Officials in the ministry of corporate affairs say that the new law proposes to remove the time limit. This would mean that the rights of the investors to claim their unpaid dividend amounts credited to IEPF do not pass away. “The existing provisions on investor education and protection have been recast to ensure that the claim of an investor over a dividend not claimed for more than seven years is not extinguished,” an official in the ministry said. The idea, aimed at a safeguarding the interests of minority shareholders, would require the government to make statutory changes in the administration of IEPF. The new company law puts premium on the protection of investors rights. The ministry of corporate affairs is also known to have opposed the finance ministry’s stand that investor protection being the primary responsibility of market regulator Sebi, the investor protection fund should reside with the latter. Rejecting the finance ministry stand, the corporate affairs ministry had contended that investor protection was related to the corporate governance initiatives of the government and was necessary for safeguarding the interests of investors.