The government of India developed the IEPF or Investor Education and Protection Fund to safeguard and educate investors that will protect them from losing control of their stock and assets. There are many examples of investors failing to select a nominee for their shareholdings. This means if an investor passes away, his investments are transferred to the government, along with the money related to unclaimed dividends or unclaimed stock dividends. After that, these funds can be used by the government as they think right unless the rightful heir of the investor makes his/her claim.
The IEPF encourages and allows investors’ to contact the government to ask for their dividends and even request that their shares that are long-forgotten shares be refunded, ultimately facilitating lost shares recovery.
The IEPF was developed with the investors or shareholders’ best interest in mind, and hence, it helps protect the monies of investors along with raising awareness regarding this issue.
What is the meaning of an unclaimed dividend?
A share in profits made by an organization distributed to every shareholder is known as a dividend. The quality and quantity of Dividends are determined and declared by the Board of Directors. There can be an interim or a final dividend, where the final is mainly declared at the end of the financial year. In contrast, the Dividend that is declared on a half-yearly or quarterly basis is called an interim Dividend.
Usually, dividends are paid on a specific date that is predetermined. However, if declared Dividends are not paid until the date of the pay-out, it is known as an Unpaid Dividend. It is usually paid by the specific company on demand and also is a liability for the company.
What is the difference between Unpaid Dividends and Unclaimed Dividends?
Unpaid and Unclaimed Dividends are actually very different from each other. If a company offers dividends to its shareholders, they need to claim they paid dividends. Hence, the unclaimed dividends are recorded when a certain shareholder claim the paid dividends.
These kinds of unclaimed dividends are mainly recorded when a shareholder becomes unable to claim its paid dividends. When a company remains unable to distribute dividends to shareholders after those are announced, those types of dividends are called unpaid dividends. Those dividends are required to be claimed by shareholders within 30 days of the declaration of those kinds of dividends.
Those kinds of dividends are usually kept in an unpaid dividend account that is completely separate. Before the year 2000, all dividends were sent by dividend warrants and cheques. Most of the dividends turn out to be unclaimed due to some reasons, like incorrect address, change of address, etc.
If dividends have remained unclaimed for more than seven years, the company usually sends such dividends to the account of IEPF or Investor Education and Protection Fund. Moreover, a shareholder is attributed with the right to claim such dividends from the IEPF at any point in time.
All about IEPF or Investor Education and Protection Fund
IEPF or Investor Education and Protection Fund, works for the purpose of promoting investors’ awareness and also for the protection of their interests. It is used for several crucial tasks, such as:
Promotion of the protection, education, and awareness of the investors.
Refund of matured debentures, matured deposits, unclaimed dividends, and also application money due for interest and refund.
Distribution of disgorged amount among identifiable and eligible applicants for debenture-holders, debentures and shares, depositors or shareholders who have suffered losses due to any other person, according to the order of the court or disgorgement.
Reimbursement of all types of legal expenses incurred in pursuing the class action suit that is under Sections 245 and 37 by members, depositors or debenture-holders as sanctioned by the Tribunal.
Any other purpose incidental, in accordance with those rules as prescribed, that the certain investor whose amounts as noted under Clauses (a) – (d) of Sub-section (2) of Section 205C is sent or transferred to the IEPF or the Investor Education and Protection Fund, after the time period of seven years expires, as per the Companies Act, 1956, is entitled to gain a refund from the organization Investor Education and Protection Fund related to such claims according to the rules under this specific Section.
What happens to unclaimed shares?
Following the date shown next to each year, the unclaimed shares will be transferred to the IEPF. After that, there won’t be any further claims.
What happens to unclaimed dividends? How to claim it?
When a dividend is not claimed for more than seven years, it turns out to be an unclaimed dividend. An investor can claim his unpaid or unclaimed dividends, matured deposits, matured debentures, etc., for a refund from IEPF by following a certain procedure provided by the authority. Therefore, you can easily reclaim your wealth, including your unclaimed stock dividends and IEPF unclaimed shares from the IEPF authority.
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