Investor Education and Protection Fund Authority established under Section 125(5) of the Companies Act, 2013 is an authority to administer for administration of Investor Education and Protection Fund established under Section 125(1) of the Act. Operating provisions of Section 125 are not force, but recently a Notification S.O. 125(E) dated 13th January 2016 notified part of this Section to be effective with effect from 13th January 2016. Consequently, Ministry of Corporate Affairs also put a draft notification for the Investor Education and Protection Fund Authority (Appointment of Chairperson and Members, holding of meetings and provision for offices and officers) Rules, 2016. In this post, we discuss the Notification and these Rules.
“The Central Government hereby appoints the 13th day of January, 2016 as the date on which the provisions of sub-section (5), sub-section (6) [except with respect to the manner of administration of the Investor Education and Protection Fund] and sub-section (7) of section 125 of the said Act shall come into force.”
- Sub – Section (5) – Investor Education and Protection Fund Authority;
- Sub – Section (6) – Manner of administration of the Fund (These words strike off here, are not come into force) appointment of chairperson, members; and chief executive officer, holding of meetings of the authority; and
- Sub – Section (7) – Offices, officers, employees and other resources.
All other provisions of Section 125 are still not in force.
“Investor” means any person, who has committed money in shares, or debentures, bond or deposits under a scheme or plan of a company registered under the Act. [Rule 2(f)]
This definition is not inclusive and therefore potential investor is potentially not an investor for purpose of these Rules. This may limit educative mandate of these rules. I suggest for a widest possible interpretation to include potential investor and future investors like present day student.
Establishment of Authority
The Investor Education and Protection Fund Authority shall be established on the date notified by the Central Government. This date is yet to be notified. [Rule 3]
Composition of Authority
The Authority shall consist of –
- Chairperson – Secretary, Ministry of Corporate Affairs shall be ex – officio chairperson of the IEPFA;
- Six members –
- A nominee of RBI not below the rank of Executive Director;
- A Nominee of SEBI not below the rank of Executive Director; and
- Four person having special knowledge and experience of not less than fifteen years in finance, management, accountancy or law with one person each from such discipline and such person shall have special knowledge or professional experience, which shall in the opinion of central government shall be useful to the authority;
- Chief Executive Officer and convener appointed by Central Government. [Rule 4 Read with Rules 5, 6 and 7]
Functions of Authority
Subject to the provision of the Act, the IEPFA shall have duty to administer the IEPF. [Rule 10(1)]
Without prejudice to the generality of provisions, the function of the authority shall include the following, namely –
- The Authority may constitute Permanent committee for overseeing the functions;
- Each committee shall comprise two members, Chief Executive Officer and concerned functional head who shall be the secretary of the committee. The committee shall be headed by an ex – officio member.
- The committee may invite experts with special knowledge and expertise, as an when required to assist on any specific issue;
- The Authority may outsource, if required, work related to fund and share management.
- The broad functional division of the authority shall be as per Schedule II to these Rules.
Functional Divisions of the Authority
- Investment / Fund Management
- Claims and Settlement
- Legal and Enforcement
- Investor Education and Protection
- Finance, Account and Audit
Please note: This blog invite readers to share their comments, suggestions, hardship, queries and everything in comment section. This blog post is not a professional advice but just a knowledge sharing initiative for mutual discussion.