When a company declares a dividend but a shareholder does not claim it, the money cannot simply stay with the company. Section 124 of the Companies Act, 2013 requires the company to transfer the unpaid amount to a separate bank account called the Unpaid Dividend Account.
The Unpaid Dividend Account
The company must transfer the unpaid dividend to the Unpaid Dividend Account within seven days of the expiry of the 30-day period from the declaration of the dividend. The account is maintained with a scheduled bank. The company must also upload the details of the unpaid dividend on its website.
The seven-year rule
If the dividend remains unclaimed for seven years from the date of transfer to the Unpaid Dividend Account, the company must transfer the amount to the Investor Education and Protection Fund (IEPF). The transfer must be made within 30 days of the expiry of the seven-year period.
The company must also transfer the shares on which the dividend has remained unclaimed for seven consecutive years to the IEPF. The shares are transferred in the name of the IEPF Authority.
The claim process
A shareholder whose dividend or shares have been transferred to the IEPF can claim them back. The shareholder must file Form IEPF-5 with the IEPF Authority, along with the supporting documents. The company must verify the claim and send a verification report to the IEPF Authority. The IEPF Authority then processes the claim and refunds the amount or transfers the shares.
The company's obligation
The company must file Form IEPF-1 for the transfer of the amount, Form IEPF-2 for the details of the unpaid dividend, and Form IEPF-5 for the claim. The company must also maintain the records of the unpaid dividend and the transfer to the IEPF.
The practical points
The company should track the unpaid dividend and transfer it to the Unpaid Dividend Account within the prescribed time. It should transfer the seven-year-old amounts to the IEPF. The shareholder should file the claim with the IEPF Authority and follow up with the company for the verification.
Call to Action: We advise companies and shareholders on unpaid dividend transfer, IEPF compliance and claims. For an IEPF review, contact office@anujdesaiassociates.com, Ph No. 9619456656, Website https://anujdesaiassociates.com, LinkedIn linkedin.com/in/ca-anuj-desai-122547230.