Reclaiming shares from the Investor Education and Protection Fund (IEPF) is set to become simpler and quicker, if a new set of proposals by the Ministry of Corporate Affairs (MCA) comes into force.
The ministry has initiated a consultation process, which is open for public comments until April 15 , with the final framework expected to be released after the General Elections, according to sources familiar with the matter.
The idea is to reduce the time to reclaim shares from the current duration of up to a year to just 60 days. Moneycontrol look at the proposed changes and their anticipated impact.
Why do shares end up in the IEPF?
Shares and dividends are transferred to the IEPF, if investors fail to collect dividends on their shares for seven consecutive years. This typically occurs when bank accounts linked for dividend payments are dormant or closed. In such cases, investors must file a claim with the IEPF to retrieve their shares and dividends.
What are the issues with the current system?
The number of unclaimed shares has been steadily increasing in recent years, along with the number of claims to recover them. In fiscal year 2024 alone, the IEPF approved over 16,000 claims and transferred 1.05 crore shares to investors.
Currently, the process for reclaiming shares involves investors submitting a form to the IEPF Authority (IEPFA), which then validates the investor's KYC documentation and claims. However, due to the high volume of claims, the process can take up to a year.
What are the proposed changes and how will they streamline the process?
The MCA has proposed delegating some work to the companies whose shares are being reclaimed. The consultation paper suggests that every company should appoint one or more nodal officers for handling share reclaims.
Investors should then file their claim forms with these nodal officers, who must verify and approve or reject a claim within 30 days. Upon approval, the company would send the claim information and accompanying documents to the IEPF. Based on this, the IEPF would release the shares to the company, which would then transfer them to the investors. This significant change is expected to reduce the claim period to just 60 days.
How can investors locate a nodal officer for filing applications?
Once the rules are finalised, every listed company will be required to publish a list of nodal officers. Companies will also bear additional responsibilities and liabilities to ensure the accurate processing of applications. The MCA is implementing a monitoring system to verify whether the nodal officers are transferring shares and dividends to the correct accounts
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