Home / Money / Personal Finance /  Discrimination by cos against IEPF claimants
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Sebi’s dematerialization drive since December 2018 has been a great step towards digitization, with a meagre 2% plus shareholders now holding physical shares in listed companies. Sebi’s recent guidelines of 3 November and 14 December 2021 have increased investor servicing activity with the registrar and transfer agents (RTAs)/companies seeking KYC (know your customer) and other compliances.

As per the Companies Act 2013, if dividend is declared and remains unpaid or unclaimed by shareholders, then within 30 days from the date of the declaration, the company has to transfer the amount to the unpaid dividend account. A dividend warrant can be returned on non-delivery due to several reasons such as change in address, non-existence of an address or the absence of a shareholder due to his demise with no heirs or family members aware of the investment, etc. 

Shareholders, if alive, or through their heirs, if deceased, can approach the company concerned for claiming their entitlement. The company is bound to pay it after diligence on the legitimacy and validity of the claim. It is bound to transfer the unpaid or unclaimed dividends for a period of 7 years from the date of initial transfer including corresponding shares (if in physical form) along with interest accrued to the investor education and protection fund (IEPF).  Shareholders need to claim the shares as well as unpaid dividends to the extent transferred to the IEPF by following a well-documented process by filling in standard forms with data and information backed by necessary documentary evidence. This has to be uploaded on the IEPF portal. The shareholder also has to submit a copy of the uploaded forms to the company’s designated nodal officer for verification. The company with the help of the RTA post diligence also uploads the same on the portal. 

Apart from this, the shareholder can approach the RTA/company with its claim for unpaid dividends (for a period less than 7 years) for which the sum has been lying with the company. Highly reputed companies have taken a stand and communicated that this would be paid to the shareholder only after IEPF credits the shares and dividends to the claimant’s demat and bank account.  Claimants are facing such high-handed behaviour at the hands of the RTA/company. Though each of these activities and processes are independent and distinct, the RTA/company seems to club the outcomes for unknown reasons with no guidelines, notifications or supporting statutes. This is sheer harassment of shareholders.

Unclaimed and unpaid dividends are a company’s liability and hence have to be given to the legitimate or rightful claimant. 

Abhimaan Reporter, a pathologist, and his wife Kalyani Reporter, a school teacher, settled in their hometown Sihor in Gujarat after their retirement. An IPO investor buff till the mid-1980s, Abhimaan’s investment portfolio comprised small lots of 50 to 100 shares of diverse companies and that too in physical certificates. Post-retirement, while their joint pension was adequate for sustenance in a small town, a sudden medical emergency and fund requirement revealed non-receipt of dividends. The reason was that a change in address was not intimated to companies. Correspondence revealed that some investments had already moved to IEPF. Kalyani initiated the process immediately and the IEPF applications got uploaded during the next few weeks and physical submissions were made to the company for verification. (The example and names given here are merely for illustration). 

Kalyani then wrote to the RTA/company for claiming unclaimed dividends of six years, lying with the company. A few companies stated that it would be provided on completion of the IEPF process. 

Kalyani’s student, a financial advisor, made a representation to the RTA/company intimating the possible applicability of penal provisions under Sec 124 (7). Post this, the RTA telephonically intimated Kalyani about the oversight of the staff concerned. However, actual bank credit is still awaited. 

Legitimate shareholders are entitled to receive their unpaid and unclaimed dividends lying with the company. Once the company has verified and uploaded the confirmation on the IEPF portal, it establishes the ownership of the claimant as a shareholder.  The RTA/company is taking advantage of the unaware retail investor fraternity and continues to disregard principles of investor/ shareholder protection and interests.

Rajat Dutta is founder & initiator of Inheritance Needs Services Pvt. Ltd.

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