MCA vide its notification dated 28th February, 2017 had tried to simplify the modus operandi for transferring shares to the IEPF Authority. In doing so, it had left various questions unanswered. For instance, Rule 6 of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2017 (‘IEPF Amendment Rules’) stated that companies would be required to transfer the shares to the IEPF demat account. However, the same did not mentioned anything regarding the expected time frame by which such accounts would open or what would be the modalities of transfer at the depository level. As a result of which corporates kept wondering on the ways to effect the transfer of shares to the IEPF account.
IEPF Special Demat Account
Finally, after much speculation on the above and almost two months from the release of the IEPF Amendment Rules, 2017, MCA vide its general circular no 03/2017 dated 27th April, 2017 has unfolded a few of knots in the said Rules. The said circular deals with the following:
- IEPF Authority has decided to open a special demat account with NSDL through a DP of NSDL.
- The said demat account will have special features and functions to support digital operations and facilitate the record keeping of the shares transferred to IEPF
- Details of such accounts are yet to be circulated which makes the circular less that of executory and more of informatory in relevance.
- Information related to the shareholders whose shares are being transferred will be provided to the NSDL in the prescribed format.
- Here again the incompleteness of the circular is evident as it writes that the prescribed file formats and operational procedures for transfer will be provided by 30th April, 2017 and May 15, 2017.
Fees Burden on Companies
- Fees at the time of effecting transfer will be Rs. 10 per record subject to minimum of Rs. 500;
- Annual Maintenance fees of Rs. 11 per record subject to minimum based on paid-up capital of the company as follows:
|Nominal Value of Admitted Securities (Rs)||Annual Custody Fee Payable by Company (Rs)|
|Upto Rs. 5 crore||2,700|
|Above Rs. 5 crore and upto Rs. 10 crore||6,750|
|Above Rs. 10 crore and upto Rs. 20 crore||13,500|
|Above Rs. 20 crore||22,500|
- The aforesaid charges will be in addition of the fees charged by Depositories for corporate actions.
- By mentioning a minimum limit as to the amount for maintenance fees, unnecessary fees burden has been created on the those accounts which have barely a few folios to transfer;
Incomplete reference to the IEPF Amendment Rules, 2017
At the very beginning, the circular refers to the second proviso to Rule 6 of the IEPF Amendment Rules, 2017 stating – “Pursuant to the second proviso to Rule 6 of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2017 notified on February 28, 2017, where the seven year period provided under sub-section (5) of section 124 is completed during September 7, 2016 to May 31, 2017, the due date for transfer of such shares by companies is May 31, 2017”.
However, the actual text of the said provision is – “Provided further that in cases where the period of seven years provided under sub- section (5) of section 124 has been completed or being completed during the period from 7th September, 2016 to 31st May, 2017, the due date of transfer of such shares shall be deemed to be 31′ May, 2017.
Accordingly, the due date of 31st May, 2017 is the due date for transferring shares in both the following cases:
- 7 year period has already completed; or
- 7 year period will complete from the period starting from 7th September, 2017 till 31st May, 2017.
This circular even though has quenched a bit of curiosity of the companies, it has again enabled its viewers to keep waiting for the so called modalities from both the end of the MCA as well as NSDL. Since, MCA has taken quality time to search certain case laws in the answer, till now many companies were expecting that the due date mentioned under IEPF accounts would get extended. However, the same is not correct.
Further, in the event of such little time left for the due date to arrive, MCA should speed up its process to fix the modalities for effecting transfer to IEPF demat account.
By: Pammy Jaiswal:firstname.lastname@example.org