The Investor Education and Protection Fund ('IEPF') has been established for promotion of investors' awareness and protection of interests of the investors. Section 125 of the Companies Act, 2013 ('Companies Act') prescribes (i) the amounts which companies are required to transfer to IEPF (such as unclaimed dividends), (ii) use of amounts lying with the IEPF and (iii) other related matters. The Central Government has also established the Investor Education and Protection Fund Authority ('IEPF Authority') for administration of the IEPF. The IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 ('IEPF Rules') govern matters relating to inter-alia the amounts to be transferred to and paid by the IEPF. The MCA notified certain amendments to the IEPF Rules on August 14, 2019. Summary of the key amendments is set out below:

i. Every company which is required to credit amounts to the IEPF or has deposited amounts or transferred shares to the IEPF is required to nominate a nodal officer, who must either be a director, chief financial officer or company secretary of the company, for the purposes of verification of claims and coordination with the IEPF Authority. In case a company fails to appoint a nodal officer, every director of the company will be deemed to be nodal officer and be liable for any failure to comply with the requirements of the IEPF Rules.

ii. For any refund of amounts or shares to be made out of the IEPF, the company is required to verify the details in the Form No. IEPF-5 relating to the claims received by the company and send an online verification report to the IEPF Authority, along with all the documents submitted by such claimant, within 30 days of receipt of the claim; failing which the company will be liable for a penalty up to Rs. 2,500 on account of such delay. A failure to submit the verification report renders the company and the nodal officer liable for breach of the Companies Act.

Published In: Inter Alia - Quarterly Edition - September 2019 [ English

Date: September 30, 2019

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