Yesteryear savings of millions of shareholders has been lying unclaimed in the form of physical Demat share certificates physical share certificates. According to the latest circulars by SEBI to prevent fraud, tons of measures have been taken, including banning the transfer of physical share certificates and their subsequent transfer of shares to the IEPF (Investor Education Protection Fund) account because of unclaimed dividends for the past consecutive seven years.
These shares can only be traded once they have been dematerialised or they are retrieved from the IEPF account into your personal Demat account.
Challenges Faced in the Dematerialisation Process
There are quite many issues which may act as a constraint for the shareholders in dematerialising their physical shares, such as:
1. KYC Updates: SEBI recently mandated that shareholders who hold physical shares have to update their PAN details, Address proof, Bank Details, and email addresses with their Registrar and Transfer Agents (RTA). Their non-compliance might lead to non-receipt of the future dividends, annual reports and the transfer of their shares to the IEPF account.
2. Name Correction: When it comes to the establishment of the Identity of the shareholder, even the slightest difference in the spelling or change of name or surname or both can become a major issue. When the shares were purchased earlier from the open market, the rules to cross-check transfer deeds with valid identity proof were not so strict. But now, the Shareholders have to follow strict rules and procedures to establish their identity. They call for a Gazette notification and paper advertisements if the differences are major.
3. Join Ownership of Shares: The problem with joint ownership is that all the joint holders have to give consent at the same time, along with complying with the formats of the RTAs when it comes to KYC updates, Name corrections, duplicate issue of shares and retrieving of shares from IEPF account. It becomes a bigger problem if one or more joint holders pass away.
4. Signature mismatch: This issue is relatively common and is faced by almost all of the shareholders. The flow of writing changes with age and time and thus leads to changing of signature.
5. Loss of Share Certificate: There are situations where the shareholder has lost the certificates due to wear and tear or negligence. The Shareholders will have to get duplicate share certificate issues from their respective RTAs after complying with the formats of indemnity and affidavit; there are multiple layers of scrutiny for the same.
6. Investor Education Protection Fund( IEPF): According to SEBI’s recent circular, any shareholder who fails to claim dividends for seven consecutive years will have the shares transferred to the IEPF account.
IEPF has its own formats, regulations and processes to comply with.
Though the regulations and stringent filtering are put in place to prevent fraudulent claims of the shareholders, these have now caused problems and led to border-line harassment.
The silver lining here is that the shareholders can get a refund of their unclaimed investments or shares which are transferred to the IEPF by the company based on the provisions of section 124 of the Companies act, 2013 and IEPF (accounting, audit, Transfer and Refund) Rules, 2016.
The process to recover Shares from IEPF
1. Claimant filing to authority
Any claimant who wants to get a refund or recover the shares back in his/her name has to submit the IEPF-5 FOrm on the MCA portal. The form should have the following information.
A. the applicant’s information
B. the company information and the due amount
C. Details of shares to be claimed
D. Details of dividends to be claimed
E. Aadhar number or Passport/OCI/PIO card number in case the Claimant is NRI or a foreigner
F. Bank account details which are linked to aadhar
G. Demat account number
2. Submit the claim to the company
After submitting the IEPF-5, the claimant has to send a copy of the form in an envelope labeled as ‘Claim for a refund from IEPF Authority’ to the nodal officer/RTA of the company with the following documents:
- Print out of the form with the signature.
- A copy of the acknowledgment with SRN number.
- The original Indemnity bond with a signed non-judicial stamp paper of the amount specified in the Stamp act.
- Original advance stamped receipt signed by the claimant and witnesses.
- Original Share certificates or a copy of the transaction statement.
- Aadhar card.
- Entitlement Proof such as share certificate or interest warrant application number etc.
- Passport or Overseas citizen of India (OCI) or Person of Indian Origin (PIO) card in case of NRIs or foreigners.
- A canceled cheque.
- Copy of Demat’s client master list.
3. Submission of claim from the company to IEPF authority
Once the claim from the claimant is received, the company has to prepare a verification report within 15 days from the date of receiving and has to submit it to the IEPF authorities along with the claimant’s documents.
4. Refund from IEPF authority to the claimant
Within 60 days of obtaining the verification report from the relevant company, the IEPF authority has to decide on the claimant reimbursement application.
They will issue a refund sanction order when the claimant is entitled to the shares with the permission of the relevant authority. The IEPF and ‘Drawing and disbursing’ officer will send a bill to the Pay and accounts Officer for payment after verifying the Claimants entitlement. Then the shares will be credited to the Demat account of the claimant.
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