Unclaimed dividends are those dividends that have been paid by the Company but not claimed by the shareholder. The Ministry of Corporate Affairs (MCA) has proactively introduced Section 125 of the Companies Act, 2017, to deal with declaration and payment of dividends.
There are several reasons why NRI shareholders could not claim their dividend:
- Lost track of funds owned by you
- A company might have failed to find the shareholder
- They were unaware of the investments
- Change of address
- Closure of the bank account
- Mismatch signature
NRI shareholders must claim their dividends to receive the payment and correctly disclose the additional income in their tax return. If dividends are not claimed within 30 days of the declaration date, the Company will deposit them in a special unpaid dividend account. It will be obliged to pay additional interest at the rate of 12% per annum. If the dividend is not claimed until the next seven years, the Company should transfer the funds to an “Investor Education and Protection Fund”.
NRI shareholders can claim their dividend by submitting an application in online Form IEPF 5. A request letter should be sent to the Company’s Registrar and Transfer Agent (RTA). The application should include the folio number for physical Shares or the ID of the Depositary participant and the client ID, and the period for which the dividend was not received. The NRI or the claimant shall after making an application online in form IEPF-5 under Rule (1), send the same duly signed with the following documents:
- Copy of the confirmation
- Indemnity Bond
- Advance Stamped Receipt
- Cancelled Cheque
- Original Certificate
- Proof of entitlement
- Copy of the Passport/ Copy of Aadhaar
The Company will send a confirmation report to the IEPF authority within 15 days of receipt of the Form for a claim and its verification.
- Amount claimed: Authority shall present a bill to the accountancy office for e-payment by following the guidelines.
- Shares claimed: Authority shall issue the refund sanction order with the permission of Competent Authority and shall credit shares that are lying with the depositary participant in the IEPF suspense account.
The application received by the authority shall dispose of a refund of any claim duly verified by the Company within 60 days. If the applicant is a legal heir or successor or administrator or representative of the registered security holder, he must ensure that the Company completes the transmission process before filing any claim with authority. The applicant may submit only one consolidated claim in respect of a company in a financial year.
If by chance the company fails to meet with any of the requirements of the claimant’s application for their dividend, the Company will be liable to pay a fine of at least five lakh rupees; which can be further extended to 25 lakh rupees. Also, it should be noted that every officer of the Company involved in this negligence should be fined up to one lakh rupee, which may extend to five lakh rupees.