Reporting of Unpaid Dividend

At peak time of dividend declaration, Ministry of Corporate Affairs gifted Indian companies, the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016. These rules published in Official Gazette on 5^th September 2016 and came into force on 7^th September 2016.  In this post, we will discuss reporting of unpaid dividend to the Investor Education and Protection Fund Authority.

Treatment of dividend

According to sub – section (4) of section 123 of the Companies Act, 2013, the amount of the dividend, including interim dividend, shall be deposited in a scheduled bank in a separate account within five days from the date of declaration of such dividend. The company issue dividend warrant or made transfer from this account. Some shareholders may fail to cash their warrants.

According to sub – section (1) of section 124 of the companies Act, 2013, where the dividend has not been paid or claimed within thirty days from date of declaration, such amount of unpaid or unclaimed dividend shall be special account called Unpaid Dividend Account.

According to sub – section (2) of section 124 of the companies Act, 2013, the company shall, within a period of ninety days of making any transfer of such amount prepare an statement as prescribed. Accordingly, sub –rule (8) of rule 5 of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 has provision for reporting to the IEPF Authority.

According to sub –rule (8) of rule 5 of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, every company shall within a period of ninety days after the holding of Annual General Meeting or the date on which it should have been held as per the provisions of section 96 of the Act and every year thereafter till completion of the seven years period file the statement.

There is conflict between section 124(2) of Companies Act, 2013 and rule 5(8) of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 causing difference of one month seven days regarding dividend. Rule need to be aligned with the Section.

The company shall identify the unclaimed amounts, as referred in sub-section 2 of section 125 of the Companies Act, 2013 as on the date of holding of Annual General Meeting or the date on which it should have been held as per the provisions of section 96 of the Act.

Amounts to be reported

Section 125 (2) not only includes the amount in unpaid or unclaimed dividend but also includes –

• the application money received by companies for allotment of any securities and due for refund;
• matured deposits with companies other than banking companies;
• matured debentures with companies;
• interest accrued on the amounts referred above;
• sale proceeds of fractional shares arising out of issuance of bonus shares, merger and amalgamation for seven or more years;
• redemption amount of preference shares remaining unpaid or unclaimed for seven or more years; and
• such other amount as may be prescribed.

Form – IEPF – 2

The company shall furnish and upload on its own website and also on website of Authority or any other website as may be specified by the Government, a statement or information through Form IEPF – 2, separately for each year. The statement shall contain following information, namely:-

• the names and last known addresses of the persons entitled to receive the sum;
• the nature of amount;
• the amount to which each person is entitled;
• the due date for transfer into the Investor Education and Protection Fund; and
• such other information as may be considered relevant for the purposes.

 The excel sheet to be furnished with this form require following information –

• Name
• Father name
• Complete Address
• Folio number
• DP id client id
• Investment type
• Amount transferred
• Proposed Date of transfer to IEPF

There are following steps after filing form to furnish details in the excel sheet –

1. Challan generated during Payment will have a unique ID and Password.
2. User needs to wait for a day and then upload the Excel related to the form. (Excel format is attached along with the help kit).
3. Once all the fields are entered in excel sheet, click on validate. Then check the errors tab for the errors description (if any).
4. Open the IEPF Portal (www.iepf.gov.in) and click on IEPF services.
5. Click on Upload Excel.
6. Enter relevant details and login using the ID and password provided in the challan at step 1.
7. Browse and upload the file. Success Message will appear on the Screen.
8. After upload, go to ‘Confirm Upload’ service under IEPF Services.
9. Enter relevant details and then click on ‘Confirm’ to confirm the upload.
10. User needs to wait for a day and then check the updated status of the SRN.