India: Guidelines On Demat Account Of Investor Education And Protection Fund Authority

In view of upcoming due date of transfer of shares, i.e., May 31, 2017 in respect of which dividend(s) have not been claimed for last 7 years to IEPF Suspense Account, the Ministry of Corporate Affairs has issued a notification dated April 24, 2017 vide General Circular No. 03/2017 with respect to special demat account for transfer of shares to IEPF (hereinafter referred to as "IEPF") Suspense Account.

Background

The Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules 2016 (hereinafter referred to as the 'Rules'), were notified by the Ministry of Corporate Affairs (hereinafter referred to as the 'Ministry') with effect from September 6, 2017 wherein companies registered under the Companies Act are required to transfer all unclaimed/unpaid shares in respect of dividends which have remained unclaimed for the last seven years continuously to the IEPF Suspense Account.

Various representations were received by the Ministry about the Rules regarding simplification of transfer process of shares and extension of date of transfer of shares to IEPF.1 Subsequently, the IEPF Amendment Rules (hereinafter referred to as, 2017 were notified on February 28, 2017 wherein Rule 6 was amended to state that all unclaimed/unpaid shares in respect of dividends which have remained unclaimed for the last seven years shall be credited DEMAT Account of the IEPF Authority within 30 days of shares becoming due to be transferred to Authority. However, if the period of 7 years has been completed or is being completed during the period from September 7, 2016 to May 31,2016 then the due date of transfer of such shares shall be deemed to be May 31, 2017.

Special Demat Account of IEPF

i. Demat account of IEPF with NSDL

The notification of the Ministry dated April 24, 2017 states that to facilitate the process of transfer of shares to DEMAT Account of the IEPF Authority, the IEPF Authority has decided to open a special demat account with National Securities Depository Limited (hereinafter referred to as NSDL) through a Depository Participant of NSDL.

ii. Obligations of companies to share transfers

Ministry has mandated for all companies to transfer shares to the special demat account of IEPF Authority, irrespective of whether shares are held in dematerialized form or physical form. Companies also have to provide information of shareholders whose shares are being transferred to NSDL in the prescribed format.

File format for transfer of shares was supposed to be notified by NSDL on April 30, 2017. However, such format has not been notified yet. NSDL has been directed to prescribe operational procedures for transfer of shares by May 15, 2017.

iii. Fees for transfer and maintenance of shares

NSDL shall levy charge to companies to upload and maintain records of transferred shares.

For effecting transfer of shares to Demat Account of IEPF Authority, transaction fees shall be charged at the rate of INR 10 per record subject to a minimum of INR 500.

For maintenance of records of shares transferred, annual maintenance fees shall be charged at the rate of INR 11 per record subject to minimum based on paid capital of the company as follows:

Nominal Value of Admitted Securities (in INR) Annual Custody Fee Payable by Company (in INR)
Upto 5 crore 2700
Above 5 crore and upto 10 crore 6750
Above 10 crore and upto 20 crore 13500
Above 20 crore 22500

The charges mentioned are in addition to the fees that Depositories levy on the companies for corporate actions. Corporate action means any action taken by the company relating to transfer of shares and all the benefits accruing on such shares namely, bonus shares, split, consolidation, fraction shares etc., except right issue to the Authority.2

iv. Features of the Demat Account

The Ministry has clarified that special demat account shall function in paperless manner using digital processes to support IEPF operations and facilitate record keeping of shares transferred to IEPF. However, the details of the demat account are yet to be issued by the Ministry.

Takeaway

The introduction of a completely digital demat account and mandating companies to transfer shares to demat account is yet another step by the Indian Government towards an e-governed economy. However, the benefits of such account will be realized only after the account shall start operating. Also, the Ministry needs to elaborate on the charges to be levied by Depository for corporate actions of companies.

Footnotes

1. General Circular No. 15/2016 dated Decmebr 7, 2016 available at http://www.iepf.gov.in/IEPF/pdf/Gcircular15_08122016.pdf

2. Rule 2 (da) of the Rules

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions