SEBI’s dematerialization drive since December 2018 has been a major step towards digitisation, with more than 2% shareholders now holding physical shares in listed companies. The recent SEBI guidelines dated 3rd November and 14th December 2021 have increased investor service activity with Registrars and Transfer Agents (RTAs)/companies seeking KYC (Know Your Customer) and other compliances.
As per the Companies Act 2013, if the dividend is declared and not paid or claimed by the shareholders, then within 30 days from the date of declaration, the company has to transfer the amount to the unpaid dividend account. Dividend warrants can be returned on non-delivery due to various reasons such as change of address, absence of address or death of a shareholder due to his death in respect of investments to an heir or family members Don’t know, etc.
Shareholders, if alive, or through their heirs, if deceased, can approach the company concerned to claim their rights. The company is bound to pay the same after due diligence on the validity and validity of the claim. It is obliged to transfer the unpaid or unclaimed dividend for a period of 7 years from the date of initial transfer including the interest accrued to the Investor Education and Protection Fund (IEPF) as well as the respective shares (if in physical form) . Shareholders are required to claim unpaid dividend along with shares to the extent transferred to IEPF by following a well-documented procedure by filling up standard forms with data and information supported by necessary documentary evidence. It has to be uploaded on the IEPF portal. The shareholder will also have to submit a copy of the uploaded form to the designated nodal officer of the company for verification. The company also uploads it on the portal with the help of RTA Post Diligence.
Further, the shareholder can approach the RTA/Company with his claim for unpaid dividend (for a period less than 7 years) for which the amount is lying with the company. Highly reputed companies have taken a stand and informed that the same will be paid to the shareholder only after IEPF has credited the shares and dividend in the demat and bank account of the claimant. The claimants are facing such high level treatment at the hands of RTA/Company. While each of these activities and procedures are independent and specific, the RTA/Company collates the results for unknown reasons without any guidelines, notifications or ancillary methods. This is outright harassment of shareholders.
Unclaimed and unpaid dividends are a liability of a company and therefore have to be paid to the legitimate or rightful claimant.
Abhiman Reporter, a pathologist, and his wife Kalyani Reporter, a school teacher, settled in Sehore, their hometown in Gujarat, after their retirement. An IPO investor till the mid-1980s, Abhiman’s investment portfolio consisted of small lots of 50 to 100 shares of diversified companies and that too in physical certificates. Post-retirement, while their combined pension was sufficient to support a small town, a sudden medical emergency and need for funds revealed the non-receipt of dividends. The reason was that the change in address was not communicated to the companies. Correspondence revealed that some investments had already been transferred to IEPF. Kalyani immediately started the process and over the next few weeks IEPF applications were uploaded and physically submitted to the company for verification. (Illustrations and names given here are for illustration only).
Thereafter, Kalyani wrote to the RTA/company to claim unclaimed dividend for six years lying with the company. Some companies said that it will be provided on completion of IEPF process.
Kalyani’s student, a financial advisor, made a representation to the RTA/company informing the possible applicability of penal provisions under section 124(7). Thereafter, the RTA informed Kalyani over the telephone about the monitoring of the staff concerned. However, the actual bank loan is still awaited.
The legitimate shareholders are entitled to receive their unpaid and unclaimed dividend lying with the company. Once the company verifies and uploads the confirmation on the IEPF portal, it establishes the claimant’s ownership as a shareholder. The RTA/Company is taking advantage of the unknown retail investor fraternity and violating the principles of investor/shareholder protection and interests.
Rajat Dutta is the founder and initiator of Inheritance Needs Services Pvt Ltd. Ltd.