Implicit deferral of concomitant actions with IEPF amidst COVID-19?

-Pammy Jaiswal (pammy@vinodkothari.com) & Smriti Wadehra (smriti@vinodkothari.com)

Considering the pandemic, the Ministry of Corporate Affairs (‘MCA’) has relaxed various time specific provisions of Companies Act, 2013 so as to the ease the process of running a Company during the lockdown. One of such relaxation was introduction of ‘Companies Fresh Start Scheme, 2020’ (hereinafter referred to as ‘CFSS’) vide General Circular dated 30th March, 2020 [1]which has permitted delayed filing of various e-forms without any additional fees upto 6 months from the expiry of 30th September, 2020.

In furtherance to the said circular, the MCA on 13th April, 2020[2] clarified that the sanction for delayed filing without additional fees shall also apply for filings made under Section 124 and 125 of the Companies Act, 2013 read with IEPF (Accounting, Audit, Transfer and Refund) Rules, 2016. Pursuant to such relaxation, the due date for filing the e-Forms with the Registrar has been relaxed, however, the fate of concomitant actions which take place even before the filing formalities?

Please note that the CFSS is a one-time settlement scheme which allows belated filings to be cleared by the Company without payment of additional fees. Accordingly, the relaxation provided for IEPF filings is also with respect to belated filings or delayed filings up till 30th September, 2020. It is to be noted that form filing is a post facto activity. There are several pre & post filing compliance requirements which is to be executed by companies. However, when it comes to giving relaxations, the Ministry has identified form filings as the only compliance burden on the Company and did not come out with explicit relaxations on the other aspects of compliance activities connected with such filing.

In this write up, we aim to enlist such incidental activities w.r.t IEPF filings and how to ensure their conduct during the pandemic.

Sl. No. Form No. Details provided in the form Due date of filing Compliances to be ensured by the Company before filing

 

Our Analysis
1. IEPF-1 Statement of amounts credited to IEPF Within a period of 30 days of such amounts becoming due to be credited to the Fund.

 

·   Credit of unclaimed dividend to the IEPF Authority through PNB or MCA;

·   Maintenance of record consisting of name, last known address, amount, folio no. or client ID, certificate no., beneficiary details etc. of the persons in respect of whom unpaid or unclaimed amount has remained unpaid or unclaimed for a period of 7 years and has been transferred to the Fund.

The timeline for reporting the amounts credited to IEPF has been relaxed till 30th September, 2020. Does this mean that the transfer of unclaimed dividend to IEPF has also been extended?

 

No. The credit of unclaimed dividend to Authority is an online transfer and can be done from anywhere. Therefore, the transfers shall not be delayed/affected due to lockdown. Still, claiming back of shares by investors from IEPF may be delayed or disputed.

 

However, transfer of unpaid dividend by companies to a separate bank account may not be possible during the crisis as the Banks are not fully functional. Subsequently, application for claiming back shares from unpaid dividend account may also be delayed

 

Accordingly, extension is only provided for filing of statement in e-Form IEPF-1 by the Company. However, activities related to such filing has been disregarded.

 

2. IEPF-2 Statement of unclaimed or unpaid amounts and details of Nodal Officer

 

Within a period of 60 days after the holding of AGM.

 

Information to be submitted to Authority:

a)    Names and addresses of person entitled to receive sum

b)   Nature of amount

c)    Amount which the person is entitled

d)   Due date for transfer to IEPF

 

The filing requirement comes post AGM. While the MCA has come out with its General Circular dated 8th and 13th April, 2020 laying down modalities for holding EGM within a time frame till 30th June, 2020, however, no such directions have been brought for holding AGMs. However, for companies whose financial year ends on 31st December have been granted an extended timeline till 30th September, 2020 for holding their AGM. While for rest of the companies there is no such extension, it is implicit that if the AGM is held after their respective due dates, the filing is automatically extended.

 

3. IEPF-3 Form for filing Statement of shares and unclaimed or unpaid dividend not transferred to IEPF

 

Within 30 days of end of FY if company does not transfer the shares and amount to IEPF. a)   Company has to collate the information w.r.t. shares which have restraining orders

b)   Company to inform depository by way of corporate action

c)   Issuance of new certificate in case of physical shares

 

As the filing of such information is extended till 30th September, 2020, the Company may defer incidental activities w.r.t. the said form till the extended date.
4. IEPF-4 Statement of shares transferred to the IEPF Within 30 days of the corporate action containing details of such transfer.

 

·  inform at the latest available address to the shareholder concerned regarding transfer of shares 3 months before the due date of transfer of shares (which shall be 6 years and 9 months) and

·  also simultaneously publish a notice in the leading newspaper in English and regional language having wide circulation informing that the names and folio no/DP id/Client ID of the concerned shareholders are available on the website of the company, and

·  also publish on their website the details of such shareholders and shares due for transfer

 

Since, the Rules are silent on the mode of informing the shareholders, therefore, the Company may opt for sending notices vide email. Subsequently publish the same on its website. The question that might create an issue during the current times is the manner of sending individual notices to those who have not registered their e-mail ids.

 

Further, the notice will also be required to be published in newspapers. Please note that the newspaper services are operational in many parts of the Country, however, large number of people are avoiding purchase of newspapers during the crisis due to fear transmission. Hence, in our view, so as to reach a larger audience, companies may prefer e-version for this purpose.

 

5. E-verification IEPF-5 Application to the Authority for claiming unpaid amounts and shares out of IEPF Company shall, within 30 days from the date of receipt of claim, send an online verification report to the Authority.

 

Submission of online verification report along with all the documents submitted by the claimant along with scanned copy of all the original documents submitted by the claimant in physical form duly certified by its Nodal Officer along with the e-verification report and scanned copy of both sides of original physical share certificate or original bond

 

Further, if there is delay in submission of e-verification report beyond 30 days of filing of the claim the Company shall be liable to pay additional fee of Rs. 50 for every day max- Rs. 2500.

 

E-verification has been extended, hence no comments.
6. IEPF-7 Statement of amounts credited to IEPF on account of shares transferred to the fund

 

Within 30 days of transferring the amount to IEPF or date of modification of Rule.

 

Conclusion

While MCA has kept its focus on granting relaxations for filing requirements, it is to be noted that such extended timelines for a post facto activity should actually be taken as an implicit relaxation, during the current COVID -19 crisis, in fulfilling the concomitant actions in relation thereto.

 

[1] http://www.mca.gov.in/Ministry/pdf/Circular12_30032020.pdf

[2] http://www.mca.gov.in/Ministry/pdf/Circular16_13042020.pdf

 

Our other content may be viewed here- http://vinodkothari.com/corporate-laws/

Our write-ups relating to COVID-19 maybe viewed here- http://vinodkothari.com/covid-19-incorporated-responses/

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