Did you recognize that greater than ₹5,000 crore is mendacity with the Investor Education and Protection Fund (IEPF) within the type of unclaimed dividends on shares and curiosity on bonds and debentures, apart from 1.16 billion unclaimed shares. These might have been left behind by your mother and father and grandparents.
There are many buyers who’ve invested in shares/bonds/debentures of various corporations however not claimed them. This may very well be on account of a number of causes—misplaced or broken bodily share certificates, a change in tackle, dying of the first holder with no data to inheritors, non-updation of financial institution particulars, and so forth. Such quantities—dividends, utility cash, matured deposits/ debentures —which can be unclaimed by buyers for seven years are transferred to the IEPF. Thus, buyers must strategy the IEPF Authority (IEPFA) to assert their rightfully owned cash/shares.
India established the IEPFA in 2016 to facilitate refund of shares; unclaimed dividends, matured deposits/debentures; share utility cash to buyers. However, the refund charge is abysmally low at 1.8% or solely 21.8 million shares. Lack of consciousness of shareholders is the principle purpose for the low refund charge.
Investors can declare such securities/refunds of quantities from IEPF by submitting an utility on the IEPF web site (www.iepf.gov.in). Such an utility might be made by an investor or authorized inheritor in case the investor has died. The utility filed by the claimant is transferred to the nodal officer of the corporate which furnishes a verification report of the claimant to the IEPFA. Thereafter, the claims are processed by the IEPFA for refund. However, the main problem within the reclaim course of lies in establishing the rightful proprietor.
The drawback of unclaimed shares has piled up primarily on account of possession of bodily shares. As per the IEPFA, in additional than 50% of circumstances, the claimant has misplaced the unique share certificates/dividend warrants/bond/ debenture certificates, and so forth., or there’s change in identify . Thus, there is a matter of firm of entitlement as these claims pertain to securities issued previous to the demat period and are usually not KYC (know your buyer) compliant.
Several buyers nonetheless maintain bodily share certificates. Investors ought to realise that it is very important get their shares dematerialized, else, they might meet the destiny just like these buyers whose unclaimed securities are mendacity with the IEPF. In truth, it may very well be worse! This is as a result of, in November 2021, the Securities and Exchange Board of India (Sebi) has mandated KYC for all buyers and submission of those particulars to the Company or Registrar and Transfer Agent (RTA). If such particulars are usually not made out there by 1 April, then the RTA will freeze the folios. After 31 December 2025, these frozen folios will likely be referred by the RTA /listed firm to the administering authority below the Benami Transactions (Prohibitions) Act, 1988 and/or Prevention of Money Laundering Act, 2002. Further, these frozen folios (with out PAN, KYC and nomination) shall not be eligible for any cost together with dividend, curiosity or redemption cost.
Thus, the buyers can overcome these points by making certain that they’ve dematerialized holdings, an up to date KYC, and a nominee. This would assist the buyers be sure that their securities, its dividends, and so forth., are held by the fitting proprietor and don’t fall within the mistaken fingers even after their dying.
At the identical time, simplification of the cumbersome switch/transmission course of at IEPFA’s finish is the necessity of the hour. Perhaps the IEPFA can borrow some greatest practices from Sebi which has laid down totally different sorts of documentation for transmission of securities that are above/under a stipulated quantity. Even the current price range announcement to allow simpler reclaim of unclaimed shares and dividends is laudable.
Rasmeet Kohli is working with National Institute of Securities Markets. The views expressed listed here are private.
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