MCA’s new portal for checking unclaimed shares, dividends

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Understanding Unclaimed Shares and Dividends

Unclaimed shares refer to equity shares that have been allotted to an investor but remain unclaimed past a specified period. Unclaimed dividends are profits distributed by a company that are not claimed by the intended shareholders.

As per Indian regulations, if dividends declared by a company remain unclaimed for over 7 years, they are transferred along with the underlying shares to an Investor Education and Protection Fund (IEPF) set up by the government. However, the original shareholder retains the right to reclaim these assets at any time.

There is unfortunately very little awareness among retail investors about the nuances of unclaimed shares and dividends. Many are unaware of what happens when dividends are not claimed for long periods or how to recover them from the IEPF.

The Ministry of Corporate Affairs (MCA) has taken yet another investor-friendly step by announcing an integrated IT portal for tracing unclaimed shares and dividends. As per Indian regulations, if dividends are unclaimed for over 7 years, companies transfer them along with the underlying shares to the IEPF authority.

Key Development

Establishment of IEPFA

To administer the IEPF corpus and refunds, the government established the Investor Education and Protection Fund Authority (IEPFA) in September 2016 under the Companies Act 2013.

The IEPFA is entrusted with two major responsibilities:

Managing the IEPF – This includes receiving unclaimed shares, dividends and other proceeds transferred by companies and maintaining separate accounts for the corpus.
Refunding investors – The IEPFA is tasked with refunding unclaimed shares, dividends, matured deposits etc. when the original investor or heir makes a claim with proper documentation.

The creation of IEPFA as a dedicated body to deal with IEPF claims and investor refunds was an important step to streamline the entire process. It provides a centralized avenue for investors to recover their unclaimed assets.

Integrated IT Portal

During the 2023 Union Budget speech, Finance Minister Nirmala Sitharaman announced that an integrated IT portal shall be set up to assist investors in reclaiming shares and dividends transferred to the IEPFA.

This portal is envisioned to provide the following benefits:

Easy search and status tracking of claims
Smooth application process for refunds
Better experience compared to current IEPF facilities

The announcement signals the government’s intent to leverage technology and improve transparency around the IEPF. If implemented well, the portal could significantly improve investor awareness and ease the process of reclaiming unclaimed equity assets.

Launch of Search Module

As a first step towards the integrated portal, a comprehensive search module is slated to go live in October 2023. This will enable investors to check the status of any shares or dividends that may have been transferred to the IEPFA.

The search functionality is expected to cover shareholder name, folio numbers and other parameters. It will provide detailed information on unclaimed assets held with the IEPFA to help investors identify and establish claims.

This module alone is a major upgrade from the limited search capabilities currently available via the MCA21 portal. Investors can now easily ascertain if the IEPFA is holding any of their unclaimed shares or dividends.

Next Steps

While the search module is set to launch shortly, the full integrated IT portal is still in development.

Going forward, the portal is envisioned to have an end-to-end process including search, document submission, verification and claim settlement.

It will aim to provide a unified view of the claim status and minimize the need for investors to physically visit multiple agencies. The final integrated portal is expected to be a major improvement in the investor reclamation process.

Significance for Investors

The upcoming IT portal and the focus on investor education are positive steps to unlocking unclaimed assets for retail investors in India.

Firstly, the search functionality can help investors identify “lost” shares or dividends that may have been transferred to the IEPFA decades ago.

Secondly, the portal will enable seamless submission of claims thereby avoiding hassles and delays.

Finally, growing awareness about IEPFA’s role will empower more investors to proactively reclaim shares and dividends transferred from companies.

In conclusion, leveraging technology to consolidate information and streamline reclamation of unclaimed equity assets will significantly benefit small investors who may lack the knowledge or means to recover their stalled wealth.

MCA 21 Overview

Here is a brief overview of MCA 21

MCA 21 is an e-governance initiative by the Ministry of Corporate Affairs (MCA) that was initially launched in 2006. It aims to provide easy and secure access to all MCA services online for stakeholders.

The latest version, MCA 21 V3.0, was unveiled in May 2021 as part of the government’s ease of doing business efforts. It has a revamped website, new email services, and modules like e-Book and e-Consultation.