IEPF or Investor Education and Protection Fund is certainly among the safer and better things that could have happened to your investment. Given the current scenario of the economy, any private company can be subjected to solvency overnight, or simply turn out to be fraudulent. Keeping that in mind, many investors are shifting their focus from these private concerns and putting their money under banners like IEPF to make sure they get their due refund using the IEPF form 5.
But before you jump straight into it, here are some basic important things that you absolutely need to know about IEPF.
What is IEPF?
The full form of IEPF is Investor Education and Protection Fund. It is an initiative by the Government’s Ministry of Corporate Affairs to promote investor awareness and protection of their interests in the money market. To elaborate, the fund ins entrusted to protect the interest of the investors who have put their money in securities by keeping the market well-regulated and the procedures of money handling transparent. The fund was set up under the sub sections (5), (6) and (7) of section 125 of the Companies Act, 2013 and was put into effect from January 13 of 2016.
How is IEPF funded?
Only specific investments of the security market go on to become a part of IEPF as per the sections of law. They come from –
a) Amounts in the unpaid divided accounts of the companies
b) Matured deposits with companies
c) Matured debentures with companies
d) The application money received by companies for allotment of any securities and due for refund
e) The interest accrued on the amounts in reference to unpaid dividends and matured debentures.
These amounts are only included in the IEPF if they remain unclaimed by the respective parties for a period of seven years starting from the date of declaration. There are two more amounts which are include in IEPF.
f) Donations and grants given to the Fund by the Central Government, State Governments, companies or any other institutions
g) Any interest or other income received out of the investments that the Fund has made.
Reasons behind unclaimed amounts
You must be wondering why so much amount goes unclaimed by the respective parties that an entire fund has been put in place to take care of it. But there are some legitimate reasons behind why dividends or debenture amounts remain unclaimed by parties.
1) People lose track of the funds owed to them.
2) In case of changed contact, address or bank details which were not updated with the company, the shareholders could not be located for the payment and as a result, the amount remains unclaimed.
3) In case some other member of the family made the investment, most commonly parents, and the wards might not be aware of all the records; or even if they have knowledge, they might not have the necessary documents to apply for the IEPF claim. The same can happen in case of nominees and legal heirs as well.
Also Read - Things to know about Unclaimed Dividend