How Investor Education and Protection Fund (IEPF) Demat account receives shares?

General
1

The Investor Education and Protection Fund (IEPF) Demat account is handled by the Ministry of Corporate Affairs (MCA) in India. The IEPF is a government-run fund that is responsible for protecting the rights and interests of investors, as well as educating them about the Indian capital markets.

How Investor Education and Protection Fund (IEPF) Demat account receives shares? Does MCA buy with the fund received under IEPF?

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The Investor Education and Protection Fund (IEPF) Demat account receives shares in the following ways:

  1. Transfer from shareholders: Companies transfer shares from shareholders to IEPF Demat account if the shares remain unclaimed for a specified period of time as per the rules of IEPF.
  2. Direct credits: Companies may also directly credit shares to the IEPF Demat account if they receive them directly from investors or through a transfer.
  3. E-voting process: Shares received through e-voting process may also be credited to the IEPF Demat account.

The credited shares are managed by the IEPF Authority and can be claimed by the rightful owner by following the process mentioned on the IEPF website.

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Thanks, Prashanth. Shares are transferred to IEPF if they are unclaimed for 7 years. Is that mean if there is no activity in someone’s demat account for 7 years or after 7 years of the death of demat account holder? How does the depository or company decide to transfer shares to IEPF?

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If you hold shares in your demat account, the company’s registrar will transfer dividends to the primary bank mapped to your demat.

On a person’s death, either their successors inform the bank or over a period of time the bank marks the account dormant for want of re-kyc. Once the registrar is unable to electronically send the dividends, they will also attempt sending physical dividend warrants.

If the credit of the dividend warrant is not deposited into the investors bank account, the dividend is considered unclaimed. If this stays unclaimed for 7 years, the registrar of the company transfers the shares to IEPF alongwith the unclaimed dividends.

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Thanks, Mohit. If there is no claim made by legal heirs for up to 7 years then it’s transferred to IEPF. IEPF waits for another 7 years for any claim to be made. Finally, How these shares are finally settled? IEPF keep holding them or sell them and use the fund for investor protection activities?