Thursday, January 7, 2021

What is the law for transfer of shares to IEPF ( Investor Education and Protection Fund)?

The prime law on which IEPF created or standing that is not explained explicitly due to that lots of company secretaries are interpreting it differently and that is creating confusion in the investors' community. 
The law says that the provisions of section 124 (6) of the Act, 2013 states"All shares of the Company in respect of which dividends have remained unclaimed or un-encashed for seven consecutive years or more, are required to be transferred by the Company to the Investor Education and Protection Fund (‘IEPF’) established by the Government of India."
By the language and applying the logic and keeping the spirit of the law. One can clearly understand the following: but we will give you examples along with the name of few companies which company secretaries have interpreted it differently and created a big hassle for themselves and for their shareholders. 
Supergrowth would like to explain the above subject with the help of an example.
Mr.Ram hasn't claimed the dividend for Financial Year 2010-2011, however, he claimed dividend for Financial Year 2011-2012. In this case, the dividend that remains unpaid for FY 2010-2011shall be transferred to IEPF on expiry of seven years, i.e. FY 2017-2018. However, the underlying shares can't be transferred in FY 2017-2018 since Mr. Ram has claimed the dividend on such shares for FY 2011-2012. The shares will only be transferred in case there is a failure of consecutive seven years in payment of dividend. 
In this case, the underlying shares will only gett transferred to IEPF in the Financial Year 2019-2020 provided Mr. Ram hasn't encashed any dividend on such shares from FY 2012-2013 and onwards consecutively for 7 years. 
Therefore, the word 'Consecutive'mentioned under section 124 (6) is only relevant for the transfer of shares. 
Supergrowth compliance team came across till now lots of companies like
Everest Kanto Limited, Panacea Biotech Limited, IG Petro Limited, DCM Limited Limited, Archies Limited, Wockhardt Limited, Garware Marine Industries Limited, TVS Electronics Limited, etc. have made such mistakes. These mistakes not only increase the workload for company secretaries themselves but will be a big hassle for the shareholders whose shares transferred to IEPF. 
to be continued .............

No comments: