Category Archives: Chapter VIII – CA2013

DECLARATION AND PAYMENT OF DIVIDEND

COMPANY UNDER IEPF RULES


Since the introduction of Investor Education and Protection Fund (IEPF) in the year 2001, I have a keen interest in the law related to investor protection, particularly under the Companies Law. Presently, one of the significant but neglected features of the IPEF Rules is the definition of the Company. The definition has been amended several times to keep track of silent changes of several laws without much notice of the stakeholder.

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APPLICATION FOR REMOVAL OF NAME OF COMPANY


Application for removal of the name of the companies from the register of companies maintained by Company registrars has legal roots in Subsection (2) of Section 248 of the Companies Act, 2013 as discussed earlier here and now outdated. Rule 4 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 deals with its procedural aspects which we discussed earlier here. Recently, the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2019 amended Rule 4 significantly. We will discuss updated Rule 4 in this post.

[Law discussed in this post is as on 10th May 2019]

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Curious Case of IEPF – 7


Ministry of Corporate Affairs on 22nd May 2018 notified the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Third Amendment Rules, 2017 to amend Rule 6 of principal Rules and to insert Form IEPF – 7. The nomenclature of these amendments charily indicates that thought process to introduced Form IEPF -7 was started during the year 2017 but somehow delayed. Let us discuss these amendments.

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Dividend – post 9th Feb 2018


Dividend usually is a payment made by a company to its shareholders out of distributable profit. In layman term, it is a share of profit for a shareholder. The Companies Amendment Act, 2017 read with notification dated 9th February 2018 amended law related to declaration of dividend. This post discusses law related to dividend after recent amendment in the Companies Act, 2013.

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Investors in IEPF whirlpool


The Investor Education and Protection Fund (IEPF) educates investors and protect their interests. The Companies Act, 2013 brought provisions for transfer of shares of untraceable shareholders to the IEPF. The IEPF shall hold shares transferred to it as custodian and such transfer is not a statutory vesting of any property.

The Recent order of Delhi court discussed these rules in details. The High Court order that  It is imperative that the Central Government gives publicity to the transfer of shares, by virtue of the provisions (not of individual companies) to inform the public, and ensures a simple, as well as compact form with the attendant procedure, is notified, for reclaiming them.

Now, this post discusses some practical issues may be faced by innocent investors residing far interior places while reclaiming their shares.

  1. The name of the company has been changed three years ago. The investor has old share certificates and no idea of the change of name. Now, he is writing letters to the address of the company but returned by courier guy, postman or by the reception of the company. (Address of the company may have been changed, since.)
  2. The Registered office of the company is shifted from one state to another state. Now, CIN and address all things have been changed. The investors have no idea about the where about of the company. It is not easy to identify the shareholders.
  3. In one case company changed name three years ago and now shifted its registered office from the state. The Master Data of MCA give no clue about the company.
  4. After completion of 7 years of transfer of shares in the year 2024, the company find no record of the shareholder with it. How to reclaim?
  5. The Shareholders, with share certificate, have different name and address in the record of the company.
  6. Recently, a person tried to impersonate as a shareholder. But company identified that claimant was the young person while original shareholder was its retired employee. The company does not want to involve in an additional court case.
  7. Share transferred to IEPF should not be treated as par war against benami property. Many investors invested their hard earned money on the advice of some friends in share market and failed to have a trace of their investment after value vanished, somehow.

These are few cases where either investor or company needs awareness, education or clarity. The Government need an early step to retain the faith of investors and companies in the IEPF. The government should focus on the user-friendly website of MCA and IEPF.

My friend Gaurav Pingle pointed out in his article, the High Court in above-mentioned order has clarified that the shareholder continues to retain ‘title’ of the shares but loses ‘agency’. However, the Court has also stated that the company is relieved from the responsibility of holding shares or reflecting it in its list of shareholders. This needs some fine tuning in law.

Nodal Officer


Originally, neither the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 nor the Companies Act, 2013 have any mention of Nodal Officer except Form IEPF – 5. The Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Second Amendment Rules, 2017 first time bring this term in main rules.

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Transfer of Shares related to Unpaid Dividend


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.

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