On 29th August 2013, Parliament passed Companies’ Act 2013, which was later notified in the Official Gazette Notification of 30th August 2013. The Companies Act basically oversees the processes and amends the laws which are related to the companies. While the provisions of the Companies Act, 1956 are still in force, the changes and provisions of Companies Act 2013 came into effect on 12th September 2013. Section 124 of Companies Act 2013 read along with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rule 2016, as amended from time to time, prescribes the rules and laws governing the unpaid / unclaimed dividends, its accounts and issues related to it.
As per Section 124 (1) of Companies Act 2013, companies are mandatorily required to transfer any dividends which goes unclaimed or unpaid for a period of 30 days from the declaration date to a special bank account created by the company i.e. Unpaid Dividends Account, within a period of 7 days after the expiry of the said 30 days.
Under section 124 (5), any money transferred to the Unpaid Dividend Account of a company, which remains unclaimed or unpaid for a period of seven consecutive years, needs to be transferred or sent to the Investor Education and Protection Fund established under section 125 (1) of the Companies Act 2013. This means that any investor who has not claimed any dividends for a period of seven consecutive years will have to claim back his/her dividends from the Investor Education and Protection Fund (IEPF).
Further, as per section 124 (6) of the Companies Act 2013, the shares in respect of which dividends have not been paid or claimed for a period of seven consecutive years or more shall also be transferred by the company to the Investor Education and Protection Fund (IEPF) along with the unclaimed dividends. So any investor who has not claimed the dividends for a period of consecutive seven years will have to claim back the shares and the unclaimed dividends from the Investor Education and Protection Fund (IEPF) after following the complete procedure of filing the claim with the IEPF Authority.