Revised IEPF Rules and Regulations

IEPF aka Investor Education and Protection Fund was introduced by the Government of India back in September 2016, under the Companies Act, 2013. It is controlled and managed by the Ministry of Corporate Affairs. The main purpose behind setting up the IEPF was to educate investors and help them in claiming their unclaimed dividends, deposits, debentures, etc.

Last year in August and September, the Ministry of Corporate Affairs made several amendments to the IEPF Rules and today we will be enlightening you on the same. Here is the full list of revised changes:

Rule No. 2:

1. Rule 2(1)(g): Definition of the work ‘Investor’ has been excluded now which was earlier defined as: “Investor” means any person, who has committed money in shares, or debentures, bond or deposits under a scheme or plan of a company registered under the Act.”

Rule No. 3:

1. Rule 3(4)(a): Any sum received as punishment under section 38 will be transferred to the IEPF. The punishment in question is for the imitation for acquiring securities.

Rule No. 5:

1. Rule 5(1): From now on, only online payment is allowed for any amount that needs to be submitted by the companies to IEPF. This further comes under section  125 (2)(a)-(n) of the Companies Act, 2013.

2. Rule 5(2),(3) and (4): Omission of Electronic payment or through PNB branches referred to in the above rule.

3. Rule 5 (4A): Addition of a new rule namely,4A that asks companies to provide excel format alongwith Form-1A to be submitted by the companies that have transferred a sum of money referred to in section 205C(2)(a) to (d) of the Companies Act, 1956. These documents are required as a follow up to the 5(1) rule. Both excel template and Form 1A need to be filed within 60 days starting from 20th August, 2019.

4. Rule 5(6)(c): All the records submitted under 5(1) will now be maintained and inspected by the IEPF authority which wasn;t the case earlier.

5. Rule 5(8): Time period for filing form IEPF-2 has been reduced from 90 days to 60 days, after holding the Annual General Meeting, referred to in section 96 of the Companies Act 2013.

Rule No. 6:

1. Rule 6(1): Shares will not be transferred to the IEPF if any dividend has been credited to the respective member’s account within 7 years which earlier ended up in the IEPF account if a dividend was encashed.  

2. Rule 6(5): This new sub rule states that companies are required to send a statement to the IEPF after transfer of shares which further requires to fill IEPF-4 within a time period of 30 days of the action taken under rule 6(3)(c). Moreover, details of the transfer along with a copy of public notice is also required. This change limits the time period to 30 days which wasn’t defined earlier.

3. Rule 6(7): Form and documents submitted under the rule 6(5) will be maintained and  the IEPF authority has the power to inspect them.

4. Rule 6(8): This rule makes it a must to fill IEPF-4 form as a statement for transferring benefits of shares transferred to the IEPF which includes split, bonus, fraction shares, etc and more importantly this need to be done within 30 days.

Rule No. 7:

1. Rule 7(2): Form IEPF-5 can now be submitted online to the Nodal Officer which earlier required manual filling by visiting the officer. Now only the documents to be submitted alongside the form are required to be submitted physically.

2. Rule 7(2A): Companies need to appoint Nodal Officer(s) who are either a Director, CFO or CS of the company. This Nodal Officer will be coordinating with the IEPF Authority and in case a company fails to do so, the Director will be deemed as the Nodal Officer. In case of more than one Nodal Officer, others will serve as Deputy Nodal Officers.

3. Rule 7(2B): Companies need to fill the Form within the 15 days of the new rules come in effect. This form will contain all the details of the Nodal Officer including Designation, Contact Details, Address, email ID,etc. This will go to the IEPF Authority via the Form IEPF-2 and in case of any changes of the details of Nodal Officer, the changes should again go to the IEPF Authority in Form IEPF-2 within 7 days of the changes.

4. Rule 7(3): 

• The company is required to send a verification report online to the IEPF Authority within 30 days of the claim along with the Form IEPF-5 which will include all the documents submitted by the claimant. 

• If the company fails to send the verification report within 30 days, the time period can be further extended only when the company pays Rs. 50 as a fine each day which in no case can exceed Rs. 2,500. 

• If the non-receipt of the verification report isn’t presented within 90 days from filing of Form IEPF-5, the IEPF Authority has the right to reject the Form-5 after notifying via an email which hasn’t been responded within 15 days

• Company needs to maintain all the documents and should submit whenever asked to

• Failing to submit the verification report of the claim, both the company and the Nodal Officer will be held punishable under the Act.

5. Rule 7(7): 

• If the IEPF Authority finds any incompleteness or defect in a claimant’s application, they can ask for a resubmission via the email and the e-Form needs to be re-submitted with the necessary documents within 15 days failing to which the application is liable to be cancelled.

• In case the claimant finds any missing information, s/he needs to file the e-form and send the documents within 15 days to the Nodal Officer of the company which will be further verified by the company.

• If the company finds any incompleteness,  the company needs to file the revised verification report and will further send all the necessary documents as called for within 30 days.

6. Rule 7(8): If any claimant gets to be a legal heir and/or successor and/or administrator and/or nominee of a registered shareholder, the claimant is responsible to submit a self-attested copy of all the documents referred to in Schedule II along with the Form-5. For cases where the claimant has lost the securities held in physical form, s/heneeds to submit the necessary documents referred to in Schedule III along with the IEPF Form-5.

7. Rule 7(9): IEPF Authority will first e-verify the company before disposing transfer requests.

8. Rule 7(10): This rule has now been excluded.

9. Rule 7(11): Any sort of fraudulent claim by an individual will be considered a fraud under the section 447 and the claimant will be held responsible of the fraud if s/he tries to impersonate an owner, s.he will be punishable under sections 57, 447 and 448. 

Rule No. 8:

1. Rule No. 8(1)and (2): Form IEPF 6 has now been exempted.

Schedule II, III and IV:

1. Schedule II: For any transmission of securities, registration is required by submitting all the documents to IEPF Authority

2. Schedule III: In case of loss of securities, documents need to be submitted to the IEPF Authority.