Notice inviting comments from various stakeholders on draft rules for refund process from IEPF Authority
Consultation on refund process from IEPF Authority
A. Objective: To simplify and expedite the process of claim refund filed with IEPF Authority under Companies Act 2013.
B. Background: Government of India, has in accordance with the provisions of sub- section (5) of section 125 of Companies Act, 2013, established IEPF Authority (the Authority) for administration of the Investor Education and Protection Fund (the fund). The Authority has been entrusted with the responsibility to administer the fund as per section 125 (3) of Companies Act 2013 which mandates utilization of fund for:
(a) the refund in respect of unclaimed dividends, matured deposits, matured debentures, the application money due for refund and interest thereon;
(b) promotion of investors’ education, awareness and protection;
(c) distribution of any disgorged amount among eligible and identifiable applicants for shares or debentures, shareholders, debenture-holders or depositors who have suffered losses due to wrong actions by any person, in accordance with the orders made by the Court which had ordered disgorgement;
(d) reimbursement of legal expenses incurred in pursuing class action suits under sections 37 and 245 by members, debenture-holders or depositors as may be sanctioned by the Tribunal; and
(e) any other purpose incidental thereto, in accordance with such rules as may be prescribed.
- For the purpose of facilitating refund of claims in respect of shares, unclaimed dividends, debentures etc. the Central Govt. has on 05.09.2016 notified Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 as amended from time to time.
- 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. The matter has been actively discussed in Financial Stability and Development Council (FSDC) and it has been mandated to proactively reach out to investors.
- It has also been emphasized on expediting the process of reclamation with a targeted timeline cognizant of the difficulties faced when nominees are not easily identifiable. A special drive for all unclaimed funds, deposits, and shares where nominees are clearly identified, encouraging regulators to proactively facilitate this process has also been mandated
C. Rule Making/ Regulatory Practices: A Consultation paper was issued inviting comments from stakeholders on the refund process from the Authority on 09th January, 2023. In addition, various model for refund of unclaimed assets notified by various other regulators were examined. These include “The Depositor Education and Awareness Fund Scheme, 2014” notified by Reserve Bank of India and
Procedural framework for dealing with unclaimed amounts lying with entities having listed non-convertible securities and manner of claiming of such amounts by Investors; Procedural framework for dealing with unclaimed amounts lying with Infrastructure Investment Trusts (InvITS) and manner of claiming of such amounts by their unit holders and Procedural framework for dealing with
unclaimed amounts lying with Real Estate Investment Trusts (REITS) and manner of claiming of such amounts by their unit holders, notified by Securities and Exchange Board of India.
D. Proposal to ease the process of claims and refund: In order to ease the process of refund, it is being explored that the process of claim and refund will be done based upon the verification of the respective companies.
2. The Authority shall based upon the approval of the company refund the shares and the amount, as the case may be, to the respective company for further refunding it to the rightful claimant.
3. The proposed changes in Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 as amended from time to time are as at Annexure A.
4. The Authority invites comments from all stakeholders on the proposal.
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