CREDIT OF CERTAIN AMOUNTS TO IEPF

Section 124 of the Companies Act, 2013 and other provisions of laws mandates credits of certain amounts to the Investor Education and Protection Fund (IEPF). Rule 5 of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 prescribe the manner of such credit.  The procedure is now amended with effect from 20^th August 2019. We will discuss the updated process which is more logical and easy to comply.

We earlier discussed the law before the amendment here.

Rule 5 is amended in a manner that sub-rules (2), (3) and (4) is omitted, sub-rules (1), (6) and (8) amended and a new sub-rule (4A) is inserted. Presently Rule 5 consist of sub-rules (1), (4A),(5), (6), (7) and (8) along with Forma IEPF-1, IEPF-1A and IEPF-2.

CREDIT OF CERTAIN AMOUNTS

Any amount required to be credited by the companies to the Fund as provided under clauses (a) to (n) of sub-section (2) of section 125 of the Act shall be remitted online along with a Statement in Form No. IEPF 1 containing details of such transfer to the Authority within a period of thirty days of such amounts becoming due to be credited to the Fund. [Rule 5(1)]

Earlier amount to be credited was required to be deposited before the statement in Form IEPF-1. Now, the challan generated for payment of a fee for form IEPF – 1 shall be used to collect the amount to be credited to the IEPF. All the details of such transfer shall be filed with the form as it is filed earlier. The form IEPF – 1 shall be used to credit amount mentioned under Section 125(2). 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 a 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.

DETAILS OF AMOUNT CREDITED EARLIER

The companies which have transferred any amount referred to in clauses (a) to (d) of sub-section (2) of section 205C of the Companies Act, 1956 (1 of 1956) to the Investor Education and Protection Fund or Central Government, but have not filed the statement or have filed the statement in any format other than in excel template, as required under sub-rule (1) of rule 5, shall submit details mentioned in sub-rule (1) of rule 5 in Form No. IEPF – 1A along with excel template within sixty days of notification of these amended rule. [Rule 5(4A)]

This is a rule many companies and company secretaries might oppose until they realize that is a beneficial provision for their old investors who might have lost their amount to IEPF and were unable to claim it back before the introduction of this sub-rule. Section 205C of the Companies Act, 1956 had provision to transfer certain amounts to IEPF but there was no provision to claim such amount from IEPF. Presently the Companies Act, 2013 have provision of claiming such amount from IEPF. However, in the absence of details of these claimants, IEPF is unable to process these requests. To settle this legacy issue, present sub-rule is inserted.

Since Section 205C was inserted in the year 1999, the first transfer of such amount might take place in the year 2005. Companies are required to submit details of these transfers within 60 days of notification of sub-rule (4A). The last date for the purpose shall be 18^th October 2019.

RECORD OF AMOUNTS TRANSFERRED

On receipt of the statement, the Authority shall enter the details of such receipt in a Register maintained physically or electronically by it in respect of each company every year, and reconcile the amount so remitted and collected, with the concerned designated bank on monthly basis. [Rule 5(6)(a)]

The company shall maintain the record filed under sub-rule (1) in the same format along with all supporting documents and the Authority shall have the powers to inspect such records. [Rule 5(6)(c)]

The Company and the IEPFA shall maintain all record in respect of the amount so transferred to IEPF forever. Presently, law permit reclaims of the amount by its rightful owner without limitation period. Therefore the company and IEPFA shall maintain such record to facilitate any claim received in future.

STATEMENT OF UNCLAIMED AND UNPAID AMOUNTS

Every company shall within a period of sixty 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, whichever is earlier and every year thereafter till completion of the seven years period, identify the unclaimed amounts, as referred in subsection (2) of section 125 of the Act, as on the date of closure of financial year the account of which are to be adopted in the Annual General Meeting as per sub-section (1) of section 137 of the Act, separately 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 of unclaimed and unpaid amounts separately for each of the previous seven financial years through Form No. IEPF-2, containing the following information, namely:-

(a) the names and last known addresses of the persons entitled to receive the sum;

(b) the nature of amount;

(c) the amount to which each person is entitled;

(d)the due date for transfer into the Investor Education and Protection Fund; and

(e) such other information as may be considered necessary. [Rule 5(8)]

This is an amended version of earlier rule. Earlier there was no fixed reference for making the statement. Now it is end of the financial year which will be 31^st March in most of the cases. The statement is required to be filed within 60 days of holding of AGM or due date of the AMG. This due date will coincide with that of Annual Return of companies.

The company is also required to upload all this information on its own website any other website as may be specified by the Government.

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