Claiming Refund for Shares, Dividends & Debentures: Investor Body IPEFA Proposes Easing Rules; Fixed Time Frame
Moneylife Digital Team 17 January 2023
The Investor Protection and Education Fund Authority (IPEFA) has proposed to ease the rules for investors who want to reclaim their shares. The proposal includes a real-time online interface between IPEFA, companies and investors, transfer of shares through reverse corporate action and a limitation threshold before the Authority can sell shares and hold the proceeds for investors. IEPFA is seeking comments from all stakeholders on the proposal to simplify and expedite the claims settlement process.
In a discussion paper, the IPEFA says, "After the claim is filed by the claimant, the claimant and the company will be able to iterate the case between them online on a real-time basis, till documentary requirements are complete. The IPEFA will enforce the timelines and the documentation procedure within which the company has to dispose the claim."
"Cases, claims are proposed to be categorised according to their nature (loss cases, transfer, transmission, death cases, and name change) and also on the threshold of their market value. Certain types of claims below a threshold, for the same shareholder or investor, where there are minor changes like address change, or bank account number change, can be made STP (straight through process) based on approval report of the company," it says.
Further, IPEFA says, the documentary requirement can be further relaxed with the Authority continuing to process the claim above the threshold and doing share transfer and amount transfer to the claimant. "This will resolve the issue of rejection of the cases at the end of company and will provide real-time status and monitoring of the case to all stakeholders."
After the approval, IPEFA says the share and amount will be transferred to the respective company through reverse corporate action which, in turn, will transfer it to the respective claimants. "Company will be responsible to transfer the shares and amount to claimant through corporate action, once it is received by it from IEPFA. The Authority will enforce the timelines through penalties and interest."
IPEFA also suggested the introduction of a time frame for reclaiming shares. As per the proposal, investor-claimants would be able to reclaim their shares if they apply within the stipulated time. 
"It can also be considered to bring a limitation threshold (in years, say 10 years from date of transfer of shares to Authority) after which the Authority can sell the shares to convert it into amount and the claimant can claim the amount so realised," it says. 
According to IPEFA, the limitation threshold can be considered as a measure of investor protection as companies undergo many corporate restructurings, including merger, demerger, and delisting. "Also, in case of such restructuring or in case the company fails or become insolvent, the value of the share gets eroded. After a period of limitation (say 20 or 25 years), the claims can be considered time-barred."
As of 30 November 2022, Investor Education and Protection Fund (IEPF) has a balance of Rs5,685.25 crore and about 1.17bn (billion) unclaimed shares. 
According to the rules, in cases where investors have not claimed dividends for seven consecutive quarters, shares are transferred to the IPEFA and the original owners have to file claims with the Authority to reclaim these shares and dividends.
The proposal comes at a time when investors are facing significant delays in claiming IPEFA shares.
In the discussion paper, IPEFA observed that in several cases, there were delays on the side of companies in filing verification reports. It said it wants to bring in strict timelines for companies to file the verification report.
IEPFA has invited comments from all stakeholders to simplify and expedite the claims settlement process. The suggestions may be offered through the e-consultation module available at the website of the ministry of corporate affairs (MCA) or via email at [email protected]. The last date for receiving comments is 27 January 2023. 
Moneylife has been writing about the cumbersome process adopted by IEPFA for refunding investors' money. The process was so tiresome that investors or their heirs were willing to pay as much as 50% of the due amounts to 'middlemen' or 'agents' to get their money back. (Read: Shouldn't Regulators Be Accountable for Returning Rs82,000 Crore of Unclaimed Money To Savers?)
Last year, MCA simplified the claim settlement process for investors by rationalising various requirements, allowing investors to claim refunds of unclaimed dividends, deposits and application money that companies have transferred to the IEPFA. (Read: How To Seek Refund for Unclaimed Dividends, Deposits and Application Money from IEPFA)
1 year ago
There should be no option for IEPF to sell shares and hold cash, as this could lead to collusion and mis-appropriation. IEPF has been a boon for claiming shares, but tardy in response. If any option fro sale of shares exists, this should be done only after a period of 25 years from date of transfer to IEPF. Also, this should be after there is a serious attempt by the Company to provide proof that adequate measures have been taken to identify the whereabouts of the shareholder.
I recollect Mr. BY Joshi of erstwhile Reliance Mutual Fund actually identified unit holders by going back to the documents relating to subscription, and traced Bank Accounts etc.
Such an effort should be undertaken if IEPF / the Govt. if they are serious in helping shareholders.
1 year ago
Kindly make process easier...It is so difficult for a normal retail investor to apply for small amounts of Rs 5000 and so on that he/she leaves midway...Why is there not a single simple form ?
Free Helpline
Legal Credit