Unclaimed shares: A step-by-step guide for the claim and recovery process
If dividends remain unclaimed for seven consecutive years, they, along with associated shares, go to the Investor Education and Protection Fund Authority (IEPFA), a government body appointed to help people recover their unclaimed shares and dividends.
NEW DELHI : You are cleaning your house and find some documents suggesting your father had bought shares in a company. You think the shares must be worth a great amount, but you are clueless about how to proceed.
Notably, if dividends remain unclaimed for seven consecutive years, they, along with associated shares, go to the Investor Education and Protection Fund Authority (IEPFA), a government body appointed to help people recover their unclaimed shares and dividends.
The first step is to get an entitlement letter from the company whose shares you hold before you contact the IEPFA. This document details the number of shares and dividends that have been transferred to the IEPFA and acts as proof that those shares and dividends belong to you.
How to get an entitlement letter
Step 1: Figure out if the document is a physical share certificate or something else. If it's a share certificate, you just need to reach out to the company to complete the know-your-customer (KYC) process. If it's not a share certificate, you will need a duplicate share certificate. This, too, requires reaching out to the company.
Also Read: Trapped in bureaucracy: The ordeal of recovering unclaimed shares in India
On the company website, under the investor relations tab, you will find details of its secretarial department or registrar transfer agent (RTA). “Each company will have its own process for the IEPFA compliance. Some will have a shareholders' department in-house, others can extend it to RTAs. Figure it out by visiting the company website," said Ankit Garg, advocate and founder of Garg Law Chambers.
Reach out to the secretarial department or RTA to get basic knowledge about the number of shares you hold, and then fulfil the KYC requirements. Once the company is sure about your identity, they will issue you the entitlement letter to claim shares from the IEPFA.
“This is where shareholders get frustrated the most because all the legwork happens at this stage. The company demands various documents at this stage," said Sumeet Goyal, co-founder, 3S Fintech Pvt. Ltd.
Step 2: Log in to the ministry of corporate affairs' V3 portal. Visit the link and click on register.
Once registered, you will be able to fill out the IEPF-5 Form. You will have to share personal details like your PAN and Aadhar, share and dividend details, demat, and bank account details. You also need to upload the entitlement letter. Your PAN and Aadhar number will be validated. Once the authentication is done, your claim will be submitted.
Also Read: IEPFA’s digital revamp targets faster claim approval
Step 3: After the claim submission, an acknowledgement receipt and indemnity bond will be generated. Take note of your SRN (service request number) to track the status of your claim filing. You need to take a printout of the IEPF-5 Form, acknowledgement receipt, and the indemnity bond.
Send these documents along with other supporting documents (as per the company's shared checklist) to the company's nodal officer. The nodal officer will verify whether the IEPF-5 Form and other documents are correct. The company will then send an e-verification report to the IEPFA, mentioning whether the claim form has been accepted or rejected.
“In many cases, companies reject it, and one may have to repeat the process all over again. Remember, you cannot reinitiate the process immediately. It is not possible until the IEPFA, too, rejects it. It takes some time," said Garg.
“One can check the status online by logging in to the MCA portal. Some companies send an email to shareholders after the verification report is sent to the IPEFA," Garg added.
Remember, the company will retain all physical documents with itself, whether it approves the claim or rejects it.
Step 4: After the company files a positive e-verification report, the IEPF authority scrutinises the claim documents again. It can reject the claim if it finds any discrepancy. If all documents are in order, the claim will go through various levels of approval within the IEPFA before it is approved. Once approved, shares and dividends are credited to the shareholder's demat and bank accounts.
What the process should be
As must be clear, the recovery process entails various levels of verification and a back and forth between companies, shareholders and the IEPFA. The process could be simplified. “Shareholders creating a login on the MCA portal is not required. Companies have to maintain records with the MCA. Shareholders have nothing to do with them. Since most scrutiny happens by the company before issuing the entitlement letter, the second-level verification by the nodal officer of the company itself is unnecessary. The company should send the verification report to the IEPFA right after issuing the letter. Get the IEPFA Form-5 filled up at this stage itself," said Khagesh Chitlangiya, founder of Jeevantika Consultancy Services.
Also Read: I-T department is cross-verifying claims in real time. You've been warned.
Goyal said even if they have to maintain the entire process, they should work on cutting the timeline. “After the letter is issued, it is just about filling up forms and an endless wait. Ideally, the IEPFA should approve or reject the claim after e-verification report in 30 days, but it takes over 365 days. The GM level verification takes forever. They should approve or reject cases within a stipulated time, or they should be given a target number of claims to be processed monthly," said Goyal.
Further, Goyal added that transferring shares to the demat accounts should be done within 15 days, but it may take anywhere between 2 and 6 months.
Slashing steps can help in reducing the waiting period, making it less taxing for shareholders and their families.
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