Ministry of Corporate Affairs recently amended Indian companies, the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016. The Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Second Amendment Rules, 2017 published in Official Gazette on 13th October 2017 and came into force on the same date. We discussed original rules here and earlier amended rules here. In this post, we will discuss amended law related transfer of shares related to unpaid dividend to the Investor Education and Protection Fund Authority.
Due date for transfer
According to the combined reading of sub-section (6) and sub–section (5) of Section 124 of the Companies Act, 2013, transfer of shares to IEPF shall become due on completion of seven years from the date of transfer of dividend of first year (among these seven years) to Unpaid Dividend Account.
It is ==> Date of Declaration + 30 days + 7 days + 7 years (assuming all things done on last date of compliance.
However according to second proviso to sub – section (1) of amended rule 6 of these rules, in cases where the period of seven years provided under sub-section (5) of section 124 has been completed or being completed during the period from 7th September, 2016 to 31st May, 2017 31st October, 2017, the due date of transfer of such shares shall be deemed to be 31st May, 2017 31st October, 2017.
Deemed to be transmission
These Rules as well as the Companies Act, 2013 talks about the transfer of shares to Investor Education and Protection Fund. This transfer (as nomenclature) and its process faced many amendments and added confusion. Now, newly inserted third proviso declares this transfer as deemed to be transmission:
Provided further that transfer of shares by the companies to the Fund shall be deemed to be a transmission of shares and the procedure to be followed for transmission of shares shall be followed by the companies while transferring the shares to the fund.
Transfer of shares held in physical form
This was the second most contentious issue relating to the transfer of share to IEPF after the nomenclature itself. Again, clause (d) of sub – rule (3) of rules 6 substituted by these amended rules.
According to sub – clause (i) of clause (d) of sub – rule (3) of rules 6, the Company Secretary or the person authorised by the Board shall make an application, on behalf of the concerned shareholders, to the company, for the issue of duplicate share certificates. (No Change from earlier).
According to sub – clause (ii) of clause (d) of sub – rule (3) of rules 6, on receipt of the application under clause (a) [please, read this typographic error, which continue from original rules and survive from all these amendment, as sub – clause (i) of clause (d) of sub – rule (3) of rules 6], a duplicate certificate for each such shareholder shall be issued and it shall be stated on the face of it that this duplicate certificate is “Issued in lieu of share certificate No….. for purpose of transfer to IEPF” and the word “duplicate” shall be stamped or punched in bold letters on the first page of the share certificate. Such issue of the duplicate certificate shall be recorded in the register maintained for the purpose.
Now, stamping or punching requirement is not there. Now it may be typewritten also. This ease of doing business is a saving of cost of a stamp for companies and manual stamping.
The interesting thing here, original certificates shall be with the original shareholder. In case of sale which is otherwise legal, buyer has to “claim back” shares from IEPF as well through original shareholder.
According to sub – clause (iii) of clause (d) of sub – rule (3) of rules 6, particulars of every share certificate shall be in Form No. SH-1 as specified in the Companies (Share Capital and Debentures) Rules, 2014.
This is an interesting amendment as earlier rules inadvertently mentioned Form SH – 2 which is format for the Register of Renewed and Duplicate Share Certificates under Rule 6(3)(a) of the Companies (Share Capital and Debentures) Rules, 2014.
According to sub – clause (iv) of clause (d) of sub – rule (3) of rules 6 of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, after issue of duplicate share certificates, the company shall inform the depository by way of corporate action to convert the duplicate share certificates into DEMAT form and transfer in favour of the Authority. (No Change).
Account of IEPF
According to newly inserted sub – rule (13) of Rule 6, any amount required to be credited by the companies to the Fund as provided under sub-rules (10), (11) and sub-rule (12) shall be remitted to the specified account of the IEPF Authority maintained in the Punjab National Bank.
Report of IEPF Authority
According to newly inserted sub – rule (14) of Rule 6, the IEPF Authority shall furnish its report to the Central Government as and when noncompliance of the rules by companies came to its knowledge.