This article is written by Vaidha Sharma , pursuing a Diploma in Companies Act, Corporate Governance and SEBI Regulations from LawSikho.com. 

Introduction

Human desires and aspirations to want more and have more are never ending. ‘Money yields Money’ is the sound truth. There has been a constant tussle between to save or to invest, but to grow, to build wealth and to be financially more stable, the preferred option in the recent economic trend has been to invest. An investment could be in anything, it could be a business model, an idea, time, efforts or money with optimism of greater returns in years yet to come, than what was initially put in.

With more and more conglomerates and unique investing ideas there has been a shift from saving pattern to investment pattern. Investing in companies, in exchange provides return in form of dividends to the shareholders of companies, but sometimes due to ins and outs, some shareholders fails to encash the dividend for various reasons, such funds does not belong to the company nor is it claimed by shareholders, and as a jurisprudential preposition “ownership cannot be in abeyance” company law provides for the creation of Investor Education And Protection Fund(IEPF) so that the hard earned money of investors is not compromised.  

What is investor education and protection fund (IEPF)

Investor Education and Protection Fund (IEPF) is set up under Section 125 of Company Act, 2013. IEPF is a government body, i.e., it is not a company formed body nor it is regulated on separate standards among various companies as it mainly deals with all the unclaimed shares, deposits, dividends etc. Section 125 of the Act deals with (i) Amount which company needs to transfer to IEPF, (ii) utilisation of amount so transferred to IEPF and (iii) other related matters.

The main objective of IEPF is to endorse investors interest and also increase awareness and protection of investors. There are various reasons as to why some amount remains in abeyance which includes:

• No record of old, physical investments.
• Name or address changes.
• Loss of documents and old certificates; etc.

What is transferred to IEPF

Central government is the sole authority to establish IEPF. What shall be credited to the fund is exhaustively mentioned under Section 125 of Company Act, 2013 which includes shares and dividends which remains unclaimed for a consecutive period of 7 years or more as per provision of Company Act, should be transferred to Investor Education Protection Fund. Some of which includes:

1. Section 123 of the Act provides for Declaration of Dividends and Section 124 talks about Unpaid Dividend account which means that with declaration of dividend some shareholders fails to encash the same, the unclaimed dividend amount declared by the company will be transferred under Section 124(5).
2. Amount sanctioned by Central Government with specific purpose of being transferred to IEPF, after due appropriation made by Parliament by law.
3. Donations can be made to the fund by Central Government, State government, company or even other institutions.
4. Amount which is under Section 205C of Company Act, 1956 will also be transferred to IEPF.
5. Any investment, or any income from investment made out of IEPF will be transferred to the fund itself.
6. Amount received under Section 38 of the Act which speaks about amount received through disposal of security, by inducing a company whether directly or indirectly to allot or register transfer or securities to him or any other person in a fictitious name.
7. Application amount received by company for allotment and the amount is due for refund.  
8. General revenue account of central government transferred to account under Section 205A(5) of the old Act, as it was before commencement of 1999(Amendment) Act, and any remaining unclaimed fund at the beginning of this account.
9. Matured deposits other than banking companies.
10. Any amount remaining unpaid for more than 7 years, which was redemption amount for preference shares.
11. All shares as per Sec 124(6); etc.

Documents to be filed for investor education and protection fund

The whole objective of establishment of an IEPF is to protect the interest of the investor. Investor should claim dividends from the company on a regular basis because once the amount is transferred to IEPF it cannot be claimed in the routine manner. A specific procedure has to be followed which requires filing of some documents which includes:

1. Print out of claim form with claimant signature and in case of joint holders the form has to be signed by all the claimants.
2. Copy of Acknowledgement with SRN No. attested by claimant.
3. Advance stamped receipt.
4. Original certificate in case of matured deposits, debentures or bonds.
5. Copy of AADHAR card and PAN card.
6. Original share certificate in physical form.
7. In case joint holder is deceased, a copy of death certificate.
8. Proof of Entitlement.
9. Original cancelled cheque leaf.
10. Other documents;(if any optional document).

Requirements for filing IEPF related e-forms

Under the old Act of 1956, for the purpose of giving statements of unclaimed amount only one form was filed i.e.,1 INV, but with introduction of IEPF Rules, 2016, several forms are to be filed under the 2013 Act. These forms are to be filled in online mode and forms filled in physical manner are summarily rejected. The same is represented in the table below:

	E-FORM	PARTICULARS	TIME PHASE	ADDITIONAL REMARKS
1.	IEPF-1	Any amount which remains unclaimed for 7 consecutive years is required to be credited by the Company to IEPF. Also it shall be remitted online along with statement in form IEPF-1.	This amount has to be credited in the fund within 30 days of it becoming due.	Companies now can fill the new IEPF form-1, without attaching any Challan. Also companies now can remit the fund to be transferred online. Under old act of 1956 form 1INV was filed for the purpose.

 

	E-FORM	ABOUT	TIME PHASE	ADDITIONAL REMARKS
2.	IEPF-1A	IEPF-1A, allows companies to fill out investors detail in Excel template, for all kind of transfer either made through INV-1, Challans or Form-1.	Rule 5(4A) prescribe for a 60 day time limit from date notification of amended rule. No fee is charged for this form as the data collected is for convenience of company and investors.	Prior to notification of Form-1 it was a common practice that companies would remit amount due to IEPF, but failed to upload investors detail in excel template. Due to lack of information, amount refundable was not verifiable. With form-1A, it will be easier for companies in their e-verification report by providing SRN of IEPF-1A.

 

	E-FORM	ABOUT	TIME PHASE	ADDITIONAL REMARKS
3.	IEPF-2	IEPF-2 is filed under rule 5(8) and 7(2B) for: Statement of unpaid or unclaimed amount. Appointment of nodal officer and deputy nodal officer. Updating/cessation details of nodal officer and deputy nodal officer.	The form (point 1) has to be filed within 60 days from AGM or due date whichever is earlier. In matter related with nodal/deputy nodal officer the form is filed within 7 days. All accounting for IEPF-2 has to be completed till closure of fiscal year.	Earlier (1956 Act) form 5INV was filed for the same purpose. IEPF-2 is event based form in case of matter related with nodal officer. Excel sheet is prepared for each year with complete breakdown of details of dividend required to be uploaded and confirmed.

 

	E-FORM	ABOUT	TIME PHASE	ADDITIONAL REMARKS
4.	IEPF-3	Company or bank need to transfer shares or dividend under Section 125 to IEPF, but in certain situations because of order of Court, Tribunal or any Statutory authority, if the company/bank does not transfer the same shall details has to be filed by them in form-3.	Within 30 days of end of financial year.	–

 

	E-FORM	ABOUT	TIME PHASE	ADDITIONAL REMARKS
5.	IEPF-4	Pursuant to Rule 6(5), IEPF-4 has to be filed for filing statement to transfer shares and transfer of benefit under Rule 6(8). When shares are due for transfer to fund the Company will intimidate depository by way of corporate action, where shareholders have account for transfer in favour of authority. After receiving such information the depository will transfer shares in favour of DEMAT account of authority.	Within 30 days from informing depository.	Copy of public notice, Rules, 2016 has to be attached with IEPF-4.

 

	E-FORM	ABOUT	TIME PHASE	ADDITIONAL REMARKS
6.	IEPF-5	Unlike all other forms which are filed by Company, IEPF-5 is filed by shareholders whose shares, unclaimed dividend, redemption proceeds of preference shares, Application money refund, etc. has been transferred to the Fund.	This is an event formed that has to be filed by shareholder.	The procedure to fill out IEPF-5 is mentioned in Rule 7 IEPF Authority (Accounting, audit, transfer or refund) rules, 2016. Filing of IEPF-5 does not require any professional help; individual can fill the form on his own.

 

Form IEPF-5

ADDITIONAL INFORMATION

Form IEPF-5 is a new form which  Has become effective from 20, September, 2020. Some key information of which is discussed elaborately, with summary process below.

Claims by shareholders have to be made online through form IEPF-5. Registration is required to be done under link “FORMS”. Since the new IEPF-5 is a PAN verified form, so PAN is mandatory for the same. For resubmission of applications made before release of IEPF-5 i.e., 20, September, 2020, link has also been active under “FORMS”. Documents that are required to be submitted for form with nodal officer are prescribed in help kit. 15 day time period is given to claimant to rectify any detail and resubmit the form.

Summary process of form IEPF-5

	E-FORM	ABOUT	TIME PHASE	ADDITIONAL REMARKS
7.	IEPF 7	Company has to give details of amount remitted to Bank account of funds which include: Dividend on shares which has been transferred to IEPF. Proceeds recovered from delisting Companies in regard to shares transferred to IEPF. Any proceeds received on winding up of Company in regard to shares transferred to IEPF. Other conditions as prescribed.	Filed within thirty days from the date of remittance of the fund.	Under sub Rule (10), (11) & (12) of Rule 6 of IEPF Rules

IEPF during the covid crisis

India is on the downward slope of economy, a rash hit due to the fearsome Covid-19 phenomenon has put Indian economy on reverse. This had in its grip not just small business which has succumbed to it but has also affected the working of company all across the globe; it was only fair to relax some of the provisions of Company Act for the company to get back on track after a hefty lockdown was lifted.

Ministry of corporate affairs in General circular dated 30th March, 2020, introduced one time settlement scheme relaxation in wake of COVID-19 which was “Companies Fresh Start Scheme, 2020 (CFSS)” which also includes provisions of Section 124 and 125 of the Company Act related to IEPF, which permitted delayed filing of several e-forms, without any additional fees up to 6 months from the expiry of 30 September, 2020. Another circular dated 28th September, 2020, Ministry of Corporate Affairs has further extended the timeline till 31st December, 2020. This relaxation is with regards to e-forms           IEPF- 1, IEPF-1A, IEPF-2, IEPF-3, IEPF-4 and IEPF-7.

Conclusion

In a major success move, deposits worth  Rs 1,514 crore has been transferred to government IEPF which was owed by Peerless General Finance and Investment  Company to its investors for more than 15 years. IEPF governed by Section 125 has been an inalienable arm of Company Act, for protecting the interest of the investors to make them more aware. The fund is managed by a committee formed by government. Utilisation of funds is done by conducting awareness programs, campaigns and educating investors how to be more responsible with investments so as to benefit in maximum capacity by their investments.

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