Essential Directions on Recovery of Shares in India

Ashish M. Shaji

13 Jan, 2022

The Securities and Exchange Board of India issued simplified and standardised guidelines for investor service requests including the establishment of a framework for providing PAN, KYC details, details of bank, signature and other information by physical shares holder. SEBI has urged corporations and RTAs to execute such requests through papers obtained from registered emails and e-signature. SEBI has mandated all physical shareholders to provide their PAN, nomination, contact details, bank account details and specimen signature. In case where these documents are not accessible, then the Registrar and Share Transfer Agents shall freeze the folio on or after 1^st April 2023. Further, the frozen accounts will be submitted to the administering authorities under multiple enactments like Benami Transactions (Prohibitions) Act 1988 and also PML Act 2002 if they are frozen until 2025. Let’s discuss recovery of shares in India from IEPF unclaimed shares.

Recovery of Shares in India from IEPF unclaimed shares

The IEPF Rules 2017 states that any amount that is transferred to the company’s unpaid dividend account, which remains unpaid or unclaimed for more than 7 years from the date of declaration, dividend will be transferred to the IEPF along with interest. The corporation should submit a statement to the IEPF authority providing the details of the transfer in the appropriate format. Further, the authority should also provide a receipt for verification of transfer.

Filing IEPF unclaimed shares for recovery of shares in India

A shareholder whose stocks, unclaimed dividends, matured deposits or debentures, application money to be reimbursed and interest on it, if any, money raised of fractional shares, etc. is transmitted to the IEPF^[1] can claim the shares as per the procedure laid down in sub-section (6) of section 124 or can apply under clause (a) of sub-section (3) of section 125.

Here it is important to note that if the claimant is the legal heir, successor, or nominee of the registered shareholder, then he/she must guarantee that the firm completes the process of transmission and issues an entitlement letter to the legal heirs before filing the IEPF Claim with the authorities.

Process of Recovery of Shares

• A person who wants to claim shares back is required to submit an IEPF Form 5 to MCA with the following information:
• Applicant information;
• Company’s information;
• Information of the shares to be claimed;
• Amount of the dividend to be claimed;
• If the applicant is an Indian citizen, then Aadhaar number is required, and if the applicant is an NRI or a foreigner, then they are required to provide their passport or PIO card number.
• Once the online refund form is completed, the claimant must email the same to the company’s nodal officer along with the necessary documents. The following papers need to be attached:
• Copy of the acknowledgement with the SRN;
• Original indemnification bond with claimant’s signature;
• Original advance stamped receipt with claimants’ and signature of witnesses;
• Original certificates in case of a matured deposit or debenture being refunded;
• Proof of entitlement;
• Self attested copy of your demat accounts’ client master list.
• The responsible firm is required to prepare a verification report within 15 days of receiving the claim form and transmit it to the authorities in the prescribed format.
• The drawing and disbursing authority shall dispatch a bill to the pay and account officer for payment  after the completion of the claimants’ entitlement verification;
• The authority shall issue an order of refund sanction with the permission of the competent authority, if the claimant is entitled to shares.
•  The shares would be credited to the claimant’s demat account or to the extent of the claimant’s entitlement. In case the shares are physical certificates, the duplicate certificates will be annulled, and the shares are handed to the claimant.
• The authorities obtain the reimbursement application of the claimant, validated by the corporation.
• The authorities are required to decide within 60 days of receiving the verification report from the relevant firm

Conclusion

The process of recovery of shares in India allows retrieving of the securities and ensures that it comes to the possession and ownership of the security holder.

Read our article:SEBI’s Restrictions on usage of IPO funds