EPFA Invites Comments from Stakeholders on ‘Draft Rules for Refund Process’ by April 2024

Background –

• The Central Government introduced the Investor Education and Protection Fund (IEPF) to protect investors’ interests and promote awareness. It is established under Section 125 of the Companies Act, 2013 (‘Act’). The unpaid or unclaimed amounts belonging to a company’s investors are pooled and credited into the IEPF. The IEPF funds are utilized for various purposes as provided under the Act.
• The Government of India is taking various steps to reduce the levels of unclaimed assets and to expedite the refund of these assets to the rightful claimants.

Process of Refund to Claimants for Fund –

• Individuals can claim unclaimed assets by submitting an online application (Form IEPF-5) to the Authority along with the specified fee, and upon submission, the form will be transmitted online to the Nodal Officer of the company for verification of the claim.
• After filling out Form No. IEPF-5 online, the claimant needs to send physical documents such as share certificates, bond certificates, deposit certificates, or debenture certificates, along with an Indemnity Bond and any other necessary documents listed in Form No. IEPF-5, duly signed by them, to the Nodal Officer of the respective company at its registered office for claim verification. Every company required to credit amounts or shares to the fund shall nominate a Nodal Officer, who must be a Director, Chief Financial Officer, or Company Secretary, for the purpose of verifying claims with the IEPF Authority.
• The company must communicate the details of the Nodal Officer to the IEPF Authority in Form No. IEPF-2 within fifteen days of the publication of these rules, and display the Nodal Officer’s name and email ID on its website, and any subsequent changes to the Nodal Officer or their details must be reported to the Authority through Form No. IEPF-2 within seven days of such change, along with a board resolution; furthermore, the details of the Claims Refund Account and the Shares Refund Account must be communicated to the Authority in Form No. IEPF-2A within fifteen days from the date of publication.
• Upon receiving a claim in Form IEPF-5, the company must, within thirty days, send a verification report to the Authority indicating whether the claim is approved or rejected, after verifying the format specified by the Authority. If the claim is rejected, the company must inform the claimant of the reason and close the claim.

After approval of the entitlement of the claimant’s claim by the company, the Authority –

The company shall present a bill to the Pay and Accounts Office for e-payment to the claim refund account, and credit the shares to the shares refund account, thereafter transferring them to the DEMAT account of the claimant within 15 days of receipt from the Authority

• The company shall be required to send the refund transaction number or IDs for credit of the amount or shares to the claimant to the Authority within 15 days of the receipt of amount or shares in the Claims Refund Account or Shares Refund Account.
• After a verification report containing an approval for refund of shares or amount, or both, is received from a company, the Authority shall make the refund of the shares or amount, or both, as the case may be, within a period of forty-five days from the receipt of such verification report.

In case claimant is a legal heir or successor or administrator or nominee of the registered share holder–

• The claimant shall submit a self-attested scanned copy of all documents detailed in Schedule of these rules online along with the Form No. IEPF-5 and submit in original all documents duly signed by him, to the Nodal Officer of the company at its registered office for verification of claim.
• The claimant is a legal heir, successor or nominee of any registered security, or if a request for transmission of shares is received after the shares have been transferred to the Authority, the company will verify the required documents. Once verified, the company will issue a letter to the claimant confirming their entitlement to the security and provide a copy to the Authority when approving the claim through its verification report.

Fraudulent claim by the claimant–

• Any fraudulent claim by the claimant, including fraudulent impersonation of security ownership, shall be deemed fraud under section 447 of the Act, rendering the claimant liable under sections 57, 447, and 448 of the Act.

Schedule IV: Procedure to be followed while disposing the claims–

• The company shall be responsible for verifying the genuineness and entitlement of the claimant by doing the necessary verification through Aadhar Card, PAN Card, Passport, any other Government ID proof, matching of signature and photo etc.
• Completeness of all the information provided in Form No. IEPF-5, including affidavit and other supporting documents such as Gazette Notification for name change, marriage certificate, and other identity proof, along with verification of the PAN details of the Claimant with Client Master List (CML).

Umang, Audit Associate, SW