Investor Education and Protection Fund

May 24, 2023

This article is written by Mrs khushi sarkhedi , a 1 yr BA LLB student from AURO University.

Having a solid understanding of finances is crucial whether you invest occasionally or regularly. The best way to invest is by understanding the concept of “investing” and being aware of the different options available. Knowing where to invest, how much to invest, how to invest, etc. are secondary considerations. Understanding investing enables investors to more fully appreciate opportunities and associated risks, make educated decisions, and comprehend the nuances of financial markets. It also enables investors to actively contribute to the nation’s economic growth by investing their savings.

The investor Education and Protection Fund was established by the Ministry of Corporate Affairs, Government of India, keeping all of this in mind (lEPF). The purpose of this external website, which opens in a new window, is to increase investor awareness and thereby protect them in accordance with Section 205C of the Companies Act of 1956. The Investor Education and Protection Fund (awareness and protection of investors) Rules, 2001, are followed in administering the Fund. Members of the Reserve Bank of India, the Securities and Exchange Board of India, and other professionals with expertise in the area of investor protection and education make up the advisory committee.

Role of ministry on corporate affairs:

The creation of the IEPF was the responsibility of the Ministry of Corporate Affairs. However, the Ministry of Corporate Affairs informed IEPF in 2016 that investors could request a refund for unclaimed rewards. They must submit the IEPF-5 form along with the necessary IEPF website documents in order to claim this amount. The fund collects any dividends or corporate benefits that have gone unclaimed for seven years. However, there had never been a provision for the claims of legitimate investors. Over fifteen years of legal battles were fought over this issue. Finally, a judgement in favour of sincere investors has been reached.

Administration of IEPF:

The IEPF Authority, which is made up of a chairperson, a chief executive officer, and up to seven additional members who are all appointed by the Central Government, is responsible for managing the IEPF. After consulting with the Comptroller and Auditor-General of India, the IEPF Authority is responsible for managing the IEPF funds. It also keeps separate accounts and other pertinent records pertaining to the funds as required. The amount accumulated or credited to the IEPF in accordance with the Act’s provisions constitutes the IEPF’s funds.

Only the purposes specified in the Act will be used by the IEPF Authority to use and spend IEPF funds. The accounts of the IEPF will be examined by India’s Comptroller and Auditor-General. Each year, the IEPF Authority will send the Central Government the audited accounts and audit report.

Every financial year, the IEPF Authority will also compile its annual report, providing a thorough summary of all of its activities for the year, and send a copy to the Central Government. The annual report from the IEPF Authority and the audit report provided by the Comptroller and Auditor-General of India will be presented before each House of Parliament by the Central Government.

Role of IEPF:

Bringing out education Programmes through media that are related to investors’ education, awareness and protection.
Organising seminars and symposia to spread awareness of investors.
Collaborating to plan an increasing number of Investor Education and Protection activities with nonprofit organisations and associations like Consumer Unity & Trust Society and Prime Investors Protection Association and League.
Institutional frameworks and financial support are made available to organisations engaged in investor protection, awareness, and education.

In addition, the lEPF provides crucial details on important aspects of investment options, such as the role of capital markets, investing in initial public offerings (IPOs), mutual funds, stock trading, depository accounts, and debt markets. Individual external websites that open in a new window address each of these subjects. This makes it simple for a lay investor to comprehend the significance and nuances of the financial market’s terminology and practises.

Amounts credited to IEPF funds :

Amounts given as subsidies by the central government after being properly apportioned by Congress to be used for purposes prescribed by law.
Contributions made by a central government, corporation, state government, or other agency to the IEPF for use for purposes prescribed by law.
Amount of unpaid dividends account that the company has remitted to his IEPF if unpaid/unclaimed for 7 years from date of remittance. The company will transfer the unpaid dividend account amount to his IEPF along with the unpaid interest.
All shares for which no dividend has been paid or claimed for at least seven consecutive years will be transferred by the company to the IEPF with a statement detailing the same.
Amounts credited to the General Receipt Account of the Central Government pursuant to Section 205A(5) of the Companies Act 1956 and remaining unpaid or unclaimed at the time the Companies Act 2013 came into force in respect of the General Receipt Account of the Central Government. .
Amounts held in the Investor Education Protection Fund (IEPF) under Section 205C of the Companies Act of 1956.
Interest or other income from investments from IEPF amounts.
Application fee received by the Company at the time of allotment of securities and due for repayment.
Deposits with entities other than banks remained unclaimed and unpaid for seven years from the due date. The bonds that matured and the interest accrued thereon remained unclaimed and unpaid for seven years from the date of maturity.
Issuance of bonuses for 7 years or more, mergers, and proceeds from the sale of fractional shares due to mergers.
The preferred stock redemption amount has remained unclaimed or paid for over seven years.

Relevant acts, rules and regulations of investor education protection fund:

Section 205C of the Act (Establishing Investor Education and Protection

fund);

(1) The central government establishes a fund called an investor Fund for Protection and Education (hereinafter referred to in this section as the Fund for Protection and Education)

“Funds”).

(2) The following amounts will be credited to the Fund, namely:

(a) the amount in the company’s unpaid dividend account;

(b) application money received by companies for the award of any

guarantees and payables;

(d) bonds maturing with corporations;

(e) interest accrued on the amount referred to in paragraphs (a) to (d);

(f) grants and contributions to the Fund of the Central Government, State government, company or any other organization for (g) interest or other income derived from investments made of the Fund;

Provided that none of the amounts mentioned in paragraphs (a) to (d) form part of

of the Fund unless such amount remains unclaimed and unpaid for a period of time

seven years from the date they become payable.

Refund of amount credited to IEPF :

Any person or shareholder whose unpaid or unclaimed amount has been transferred from the unpaid dividend account to IEPF by the company can request reimbursement from the IEPF Competent Authority. They can claim redemption under Section 125(3)(a) of the Act and Rule 7(1) of the Investor Education and Protection Funds Regulations 2016 (Accounting, Auditing, etc.) , transfer and refund).

The Company transfers to IEPF the unpaid or unclaimed amounts of the shareholders that remain in the unpaid dividend account for seven years. However, shareholders can claim the refund of their funds transferred to the IEPF by submitting Form IEPF-5 to the IEPF Competent Authority. They must submit the required documents with Form IEPF-5 to receive reimbursement. Shareholders can request Form IEPF-5 for a refund of their unclaimed funds on the IEPF website. They have to complete the form, upload it to the IEPF website and send the required documents to the head company (IEPF) staff at the headquarters.

The relevant company will verify the IEPF-5 form and documents. The IEPF Authority will release the refund in favor of the Aadhaar-linked bank account of the applicant (shareholder) by electronic transfer on the basis of the company’s verification report.

Conclusion :

The Central Government announces a number of provisions in Article 125 regulations on investor protection requirements. He has specifically refers to the provisions relating to the appointment of members, the president and other officials, including their defined functions .

Citation :

https://www.fincash.com/l/investor-education-and-protection-fund-iepf

https://cleartax.in/s/iepf-investor-education-and-protection-fund

https://shodhganga.inflibnet.ac.in:8443/jspui/handle/10603/297576

https://shodhganga.inflibnet.ac.in:8443/jspui/bitstream/10603/297576/8/08_chapter%201.pdf

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May 24, 2023