Finance Business

IEPF Compliance for a Company: An Overview

The IEPF, Investor Education and Protection fund, is a statutory body established under the Companies Act, 2013. The fund is established to safeguard the interests of the investors and impart awareness among prospective investors. Henceforth, the company transfers all the unclaimed amounts into the IEPF fund after a prescribed period. This amount can be reclaimed by the shareholder on an application made to the company. In return, the company is then required to maintain records of all the information on the unclaimed amount held and comply with regulatory requirements of the IEPF authority. The current article will try to simplify the IEPF Compliance for a company under the IEPF (Accounting, Audit, Transfer and Refund) Rules, 2016^[1].

Eligible Transfers for IEPF Compliance

To understand the IEPF compliance for a company, it is necessary to understand the nature of the amounts that are deposited. Section-124(5) of the Companies act 2013 states that the company is eligible to transfer the unclaimed amount to the fund established under Section 125 (1). The fund enumerated under section 124 is Investor Education and Protection Funds, which is established under Section- 125(1). Further, Section 125(1) of the Companies Act, 2013 states the amounts that are eligible for claiming:

1. Unclaimed Dividends
2. Matured Debentures
3. Matured Deposits
4. Interest accrued

Moreover, Section-125(1) of the Companies Act, 2013, read with Rule 3 of IEPF (Accounting, Audit, Transfer and Refund) Rules, 2016, statesthe amounts that the IEPF receives as a fund, which shall be as follows:

1. Grants received from the Central Government
2. Donations received from State and central government and companies
3. Amount in the Unpaid Dividend Account of the Company under Section 124
4. Unclaimed amount in the General Revenue Account that is transferred under Section-205A(5)
5. Amount under Section 205C
6. Any interest received on the investment made from the fund
7. Amount under Secton 38(4)
8. Application money received and  due for refund and includes interest
9. Matures deposits and debentures, including interest accrued on them
10. Sale proceeds of fractional share
11. Unpaid redemption amount of preference shares
12. Unclaimed Dividend on Shares
13. Any income earned by the authority
14. Any other amount collected by the authority

Regulatory IEPF compliance of company

It is required to fill various forms in the process of IEPF compliance of the company under IEPF (Accounting, Audit, Transfer and Refund) Rules, 2016. It is mandatory that these forms be filed at a prescribed time and shall be submitted with the IEPF authority. The company is also required to maintain records containing the details of shares or amounts transferred to the IEPF. Below mentioned are the forms that need to be filed for IEPF compliance.

Form NO.	Rule	Statement	Purpose	Time Period
IEPF-1	Rule-5(1) of IEPF Rules, 2016	Statements Containing details of Transfer to IEPF.	The company will file this statement against the unclaimed amount lying for more than 7 years.	The form shall be filed within 30 days from the date such unclaimed amount becomes due for transfer to the fund.
IEPF-1A	Rule-5(4A) of IEPF Rules, 2016	Statement not Submitted or submitted in another format for transfer of Shares to IEPF	The company files the statement containing details of transfer to IEPF if there is a transfer of shares under Section-205 (a) to (d) and the statement is not filed or was filed in the wrong excel template.	Within 60 days from the date of publication (14-08-2019)
IEPF-2	Rule-5(8) of IEPF Rules, 2016	Statement or information of Unclaimed Amount for each year	This statement is to be filed by the company stating the information on the unclaimed amount for each of the previous 7 years and shall contain: Name And Address of the Entitled Shareholder Nature of the Amount Allocated amount of each shareholder Due date of transfer to IEPF Any other information The company shall also upload the statement of information on its website and the authority’s website.	Within 60 days from the date of conclusion of the Annual General Meeting or after the conclusion of the meeting under Section 96 of the Companies Act, whichever is earlier.
	Rule-7 (2A) and Rule-7(2B) of IEPF Rules, 2016		The company shall appoint a nodal officer (Director, CFO, CS) of the company, who shall handle all the verification and coordination activities with IEPF. Moreover, the company can appoint one or more Deputy Nodal Officers the fulfiling the requirements with IEPF. It is also necessary to mention that the Nodal officer shall be made liable for the acts of the Deputy Nodal Officer.   Further, the company must file the statement containing the details of the Nodal officer, namely: Designation Postal Address Contact Number E-mail ID   The company shall also file the statement if there is a change in the Nodal officer, along with the resolution of the board.	The statement shall be filed within 15 days from the date of publication ( 14-08-2019)       The statement shall be filed within 7 days from the date of such change
IEPF-3	Rule-6(3)(b) of IEPF Rules, 2016	Statement or information on non-transfer of Unpaid Amount to IEPF	The statement ort information is to be filed by the company stating the reason for the non-transfer of the unpaid amount to the IEPF. The amounts that are not eligible for transfer are: Order of Court or tribunal that restrains transfer of share and dividend. Shares are pledged or Hypothecated under Depositories Act, 1996 Partly enchased dividend warrant	Within 30 days from the end of the financial year.
IEPF-4	Rule-6(5) of IEPF Rules, 2016	Statement of transfer to IEPF	The company shall file the statement where the shares are transferred through the depository participant. Before effecting any transfer, the company shall have to: Inform the depository ( it shall be the depository where the shareholder have their account) by corporate action After receiving the request, the depository shall transfer the shares to the DEMAT account of the authority. The company shall publish a notice in the newspaper containing the details of the transfer of shares of the concerned shareholders before 3 months from the due date of transfer. The notice is to be filed along with the statement.	Within 30 days from the date of corporate action
IEPF-5	Rule-7(2) and Rule-7 (3) of IEPF Rules,2016	Online verification report	After receiving the claimant’s form, the company shall send an online verification report to the authority.  The company shall verify the claim and other documents received with FORM 5. The verification report shall be accompanied with: Certified copy of all the original documents by Nodal Officer E-verification report Physical Share certificates Original Bond Original Debenture Certificate	Within 30 days from the date of receipt of a claim     The authority may reject the claim if an online verification report is not sent to the authority within 60 days of filing the form.
IEPF-7	Rule-6(13) of IEPF Rules, 2016	Statement of Specific Amount remitted to the Bank	The company is required to furnish the details to the authority by way of filing Form 7. The below-mentioned amounts which are required to be transferred to the fund shall be remitted into the specific account of IEPF authority : Delisting of the company: The Proceeds that are transferred to the fund on account of the surrender of shares by the authority on behalf of the shareholders under SEBI (Delisting of Equity Shares) Regulation, 2019 Wound Up of Company:The Amount that is transferred to the fund on account of the surrender of shares by the authority if the shares are held by the authority of the wound-up company. Dividend: Any dividend received during the surrender of shares by the authority on account of delisting and wound up is transferred to the fund.	Within 30 days from the remittance date

Conclusion

To increase the scrutiny over the handling of unpaid shares and the amount of the shareholders by the company, the Companies Act, 2013 has made it mandatory that the company shall furnish all the records of unpaid amounts with the IEPF authority established by the Ministry of Corporate Affairs. As mandatory IEPF compliance, the company shall furnish all such records at the discretion of the authority.This exercise protects the interests of the investors as well as the companies from any alleged fraud on account securities. Hence, when required, the above-mentioned forms should be submitted to the competent authority for a seamless recovery of shares or other securities.

Read our Article: Understand Investor Education and Protection Fund in Detail