What are Unclaimed Dividends and Shares and How to Claim Them?
A dividend is a reward paid to the shareholder for their investment in a company’s equity and it usually originates from the company’s net profits, determined by the company’s board of directors on a time to time basis. Dividends are often declared and distributed either annually or quarterly and may be paid out as cash or in the form of reinvestment in additional stock.
In some instances some of the dividends remain unpaid or unclaimed. If a company pays dividends to its shareholder, the shareholder should claim paid dividends within 30 days, beyond which they are treated as “unclaimed” dividends in the company’s records. Whereas on the other hand, if a company fails to pay dividends to its shareholders after they have been announced by the company, such dividend is known as “unpaid “dividends.
The date on which a company announces a dividend is known as the record date, and this is when shareholders of the company are eligible to receive the distribution of dividends. If a company pays dividends to its shareholders, the shareholder should claim the dividends within 30 days after which it will be treated as an Unclaimed Dividend. Within 7 days of the expiry of the said period an account has to be opened by the company in any scheduled bank is to be called as the Unpaid Dividend Account.
All shares in respect of which dividend has not been paid or claimed for seven or more consecutive years shall be transferred by the company to the Investor Education and Protection Funds (IEPF). IEPF was an authority established by the Government of India under Ministry of Corporate Affairs in 2016, under Section 124 & 125 of the Companies Act, 2013.Companies must transfer the shares where the dividend has not been claimed or paid for seven or more than seven years to the IEPF Authority. The company must submit the details of such transfer to the IEPF Authority.
A shareholder can reclaim his / her unclaimed shares transferred to the IEPF by the company by applying to the IEPF Authority as it maintains the details of every account. However, a claimant can make only one consolidated claim regarding a company in one financial year. The aggregated claim should include the data of the various Folios from the same company. When the claimant is the legal heir, nominee or successor of the registered shareholder, he / she should first ensure that the company completes the share transmission procedure and issue an entitlement letter before filling the IEPF claim with authorities. Unclaimed shares and dividends can be claimed by following the following steps:
- A claimant has to submit Form IEPF-5 on the Ministry of Corporate Affairs portal for which he / she needs to information like – Demat account number, applicant information, company information from which the amount is due with CIN number, details of share to be claimed and details of dividend amount to be claimed.
- After submitting the Form IEPF-5, the claimant should send the copy of the form in an envelope labelled “Claim for a refund from IEPF Authority” to the company’s IEPF Nodal Office / Registrar with the online application Form IEPF-5 with the claimant’s signature, copy of the acknowledgement with SRN number.
- The company must prepare a verification report within 15 days of receiving a claim form from a claimant and submit it to the IEPF Authorities along with the claimant’s documentation.
- The IEPF Authority must decide on the claimant’s reimbursement application within 60 days after obtaining the verification report from the relevant company that has validated the claimant’s application.
