Transfer of shares to IEPF- Is the Wait Over ?

By Pammy Jaiswal & Megha Saraf, (


It seems that the prolonged postponement for transferring shares to IEPF is over. Ministry of Corporate Affairs (“MCA”) vide its Notification dated 13th October, 2017[1] has added yet another notification on Investor Education Protection Fund (“IEPF”), to its list. The Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Second Amendment Rules, 2017 (“Second Amendment Rules”) has been made effective from 13th October, 2017. Even though the Second Amendment Rules have yet again come out with an extended time line for effecting transfer of shares, some of the operational issues are not yet clarified for effecting such transfer to IEPF.

Further, MCA has also issued a Circular dated 16th October, 2017[2] which provides for certain details on the Second Amendment Rules.

The write-up is therefore, an attempt to put before a clear snapshot of the current picture on transfer of shares to IEPF.

Main Highlights of the Second Amendment Rules

The major highlights of the Second Amendment Rules are:

  • Due Date for Transfer of shares

The Second Amendment Rules have extended the due date to transfer the shares to IEPF till 31st October, 2017 for the cases where the period of seven years has been completed or being completed during the period from 7th September, 2016 to 31st October, 2017.

Accordingly, the last date for completing all the formalities in connection with transfer shall be 30th November, 2017.

  • Transfer of shares is in the nature of transmission of shares

The Second Amendment Rules have clarified that the transfer of shares to IEPF shall take place by following the procedure for transmission of shares. Even though the documentation for such transmission has not been stated in the said rules or the circular, resolution passed by a company for transferring shares seems to a supporting document in this regard.

Further, MCA Circular dated 5th June, 2017[3], had already clarified that transfer of shares to IEPF is not in the nature of transfer but a transmission and hence, the requirement of issuing duplicate share certificate may be done away with.

  • Issuance of “New” share certificates instead of “Duplicate” share certificates

In case of physical shares, the Company shall issue “New” share certificates in Form SH-1 instead of “Duplicate” share certificates. Even though duplicate certificates need not be issued, however, the new certificates issued under the said rules will have the words “Issued in lieu of share certificate no….. for the purpose of transfer to IEPF”.

Further, the requirement entering the details of the certificate issued under the said rule in the register of renewed and duplicate share certificates maintained in Form No. SH-2 has been done away with.

  • Opening of Demat Account of IEPF Authority with Punjab National Bank

IEPF Authority has opened its Demat Account with Punjab National Bank (‘PNB’) and SBICAP Securities Limited (‘SBICAP’) for the purpose of making any transfer of shares.

  • Reporting of non-compliances to Central Government

Any non-compliance of the IEPF rules shall be reported by the IEPF Authority to the Central Government.

  • Appointment of a Nodal Officer

MCA has given a time period of 15 days to all the companies for nominating a Nodal Officer for coordinating with IEPF Authority and the details of such officer shall be displayed on the website of the company.

  • Rejection of claim in e-Form IEPF-5 in certain cases
  1. The current IEPF Rules provide that the company shall be required to provide a verification report to the Authority within a period of 15 days of receiving the claim. The Second Amendment Rules provides that in case the Authority does not receive requisite documents with a period of 90 days from the date of filing e-Form IEPF-5, the claim is liable to get rejected in the hands of the Authority.

However, before rejecting such claim, the Authority shall allow a further time of 30 days to furnish the requisite documents.

  1. In cases where the claim is incomplete or not approved and communication in this regard has been sent to such claimant and company, IEPF may reject such application if rectified documents are not filed within a period of 90 days. However, prior to such rejection, a time of further 30 days in this regard.

Highlights of the General Circular dated 16th October, 2017

  • PNB and SBICAP are the DPs with whom the IEPF Authority has opened demat account. These accounts will be fully digital and paperless;
  • Format of corporate action will be prescribed by NSDL and CDSL shortly;
  • Account maintenance charges will be minimal as per the MoU entered between the IEPF Authority and the NSDL and CDSL. Such MoU will be put up on the website of the of the IEPF Authority;
  • Cash benefit arising out of and in the form of the following, shall mandatorily be transferred to the bank account opened with PNB, Sansad Marg, New Delhi.
    • dividend from shares already transferred to IEPF;
    • proceeds realized on account of delisting of equity shares;
    • amount entitled on behalf of a shareholder in case of winding up of a company.
  • Amounts mentioned under section 125 (2) shall not be transferred to the aforesaid bank account. Only the amounts mentioned in the above point shall be transferred and nothing else.


Based on the above discussions, one can conclude that IEPF has tried all its might to join the dots and made the transfer of shares become a reality, although it has taken more than a year to fix the operational issues in this regard. Now, the only clarification to be looked out for is the format of corporate action, after which companies can actually complete all the formalities and finally the wait for transferring the shares to IEPF comes to an end.




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GST and CSR Expenditure

Vallari Dubey



Indian companies, especially public and listed companies are actively engaged in Corporate Social Responsibility (“CSR”) activities. Moreover, since the introduction of Companies Act, 2013, the law has mandated compulsory CSR expenditure for a specific class of companies. In the recent months, with the advent of GST, life of corporates has experienced all sorts of challenges in terms of operational flexibility and cost. One such aspect that has not been shed much light on, is the impact of GST on CSR activities and expenditure thereon by the companies. To understand this better, we take a scenario of donating water purifiers as part of a Company’s CSR policy. In this article, we try to detail out the analysis of such scenario by studying the provisions of GST and Companies Act, 2013. Read more

FAQs on Disqualification of Directors under Companies Act, 2013

By Team Vinod Kothari & Company (

This version is dated October 3, 2017


Continuing the crackdown on shell companies, MCA in its Press Release[1] issued on September 6, 2017, expressed that the government will soon take steps against the directors of the shell companies which have not filed returns for three or more years. Post this, the Registrar of Companies of the respective states started issuing the list of disqualified directors[2] u/s 164 (2) (a) of the Companies Act, 2013. Read more

Presentation on Related Party Transaction(RPTs)- An Overview

SEBI’s Yet Another Move to Ensure Minimum Public Shareholding

By Parul Bansal, (


With the development of the economic conditions of the country, various investors including the retail investors are stepping into the securities market with the intention to earn higher return on their investments which has lead to large portion of their income being invested in shares, bonds or securities of listed companies. At this juncture, return on their investment is proportionate to the growth of listed companies. Therefore, their destiny in the stock market lies at the mercy of management and promoters of listed companies.

Stock Exchange Board of India (“SEBI”) with an endeavor to prevent the investors from the monopoly of the listed companies and to debar/prevent the undesirable/illegal transactions has enacted Securities Contract (Regulation) Act, 1956 (“SCRA, 1956”) and Securities Contract (Regulation) Rules, 1957 (“Rules, 1957”) thereof.

Minimum Public Shareholding (“MPS”)

Listed Companies are those companies of which shares are listed on the stock exchange and certain percentage of such shareholding is available for the public to trade in with transparency and liquidity. If large portion of the shareholding of listed companies remain blocked in the hands of the promoters, subsidiary or associate company then the intent of listing such securities is breached and becomes redundant. The promoters will be at liberty to manipulate the price and the market tricking will be easy. This will also reduce the floating capacity of the securities of the company due to less liquidity.  Ministry of Finance vide press release dated June 4, 2010 has also stated that:

A dispersed shareholding structure is essential for the sustenance of a continuous market for listed securities to provide liquidity to the investors and to discover fair prices. Further the larger the number of shareholders, the less is the scope for price manipulation.”

To prevent such abuse, sub-rule 19 of the Rules, 1957 specifies the conditions for initial and continuous listing of a company.

Initial Listing

As per regulation 19(2)(b) of the Rules, 1957, any company proposing to list its securities shall maintain MPS as mentioned below based upon the post issued share capital of the company:

  Post issued share capital at offer price MPS (minimum)
1 Less than or equal to INR 600 crores 25% of each class or kind of equity shares or

debenture convertible into equity shares issued by the company

2 More than INR 600 to INR 4000  crores Such % of each class or kind of equity shares or debentures convertible into equity shares issued by the company equivalent to the value

of four hundred crore rupees

3 More than INR 4000 crores 10% of each class or kind of equity shares or debentures convertible into equity shares issued by the company
In case of 2 and 3, company shall attain MPS equal to 25% within 3 years from the date of listing its securities

Relaxation by SEBI

SEBI has, vide circular dated March 10, 2017, laid down criteria for Schemes of Arrangement by Listed Entities and relaxation under Rule 19 (7) of the Securities Contracts (Regulation) Rules, 1957 (SCRR). Further, to align with the rules of Rule, 1957, amendments were carried out therein through circular dated September 21, 2017.

Pursuant to aforesaid circulars, any listed issuer may for the purpose of arrangement submit a draft scheme of arrangement under sub-rule 19 of Rules, 1957 for seeking relaxation from the applicability of strict provisions of sub-rule 19(2) of Rules, 1957, for listing of its equity shares on a recognized Stock Exchange without making an initial public offer, on satisfying the conditions as mentioned in para III of Annexure I thereof. In terms of such conditions at least 25% of the post-scheme paid up share capital of the transferee entity shall comprise of shares allotted to the public shareholders in the transferor entity. However, on fulfillment of following condition, requirement to attain such MPS may be waived off:

  1. The entity has a valuation in excess of INR 1600 crore as per the valuation report;
  2. The value of post-scheme shareholding of public shareholders of the listed entity in the transferee entity is not less than INR 400 crore;
  • At least 10% of the post-scheme paid up share capital of the transferee entity comprises of shares allotted to the public shareholders of the transferor entity; and,
  1. MPS of 25% shall be attained within a period of one year from the date of listing of its securities and an undertaking to this effect is incorporated in the scheme” .

Continuous Listing

Pursuant to sub-rule 19A of the Rules, 1957 every listed company including the Public Sector Company shall maintain MPS of 25% of the total shareholding of the Company. Initially, limit for the Public Sector Companies was fixed at 10% but later on the same was also increased from 10% to 25% to provide equal footing to listed companies and PSUs.

What if MPS is less than 25% in case of continuous listing?

Pursuant to proviso of sub-rule 19A of Rules, 1957, every listed company which is not meeting the minimum public shareholding specified under sub-rule 19 of the Rules, 1957 shall in accordance with the provision of sub-rule 19A accomplish the same within the stipulated time period which is 4 year from the date of commencement of SCRA Amendment Rules, 2014 i.e. by January 15, 2018. Earlier the time specified was upto January 15, 2017 and listed companies failing to comply with the same has faced severe consequences in past. Albeit, strict steps have been taken by SEBI against such companies, public shareholding of such companies was still below the requirement. Therefore, SEBI has, once again vide circular on July 03, 2017, extended the time limit for achieving the minimum public shareholding by one year i.e. January 15, 2018.

This extension of time yet again by SEBI is a clear indication of the its accommodative and perceptive regulatory approach and takes cognizance of the need for a reasonable timeframe within which non-compliant companies may take remedial action with respect to public holding requirements. SEBI has not only increased the time limit for bringing the public shareholding within specified limits but has also amended various Regulations and Acts thereof for achieving the requirement of minimum public shareholding.

Steps taken by SEBI to achieve minimum public shareholding

SEBI has vide circular dated December 16, 2010 and August 29, 2012 specified the methods for complying with the minimum public shareholdings such as  issuance of shares to public through prospectus, offer of shares held by promoters to public,  right issues/ bonus issue to public shareholders with  promoters or promoter group shareholders forgoing their entitlement,  etc.

Subsequently, another circular was issued by SEBI on February 08, 2012 through which listed companies were allowed to achieve minimum public shareholding through institutional placement programme. Along with the aforesaid, SEBI has also specified that listed companies desirous of achieving the minimum public shareholding may approach SEBI with the appropriate details and the same will be entertained by it on the basis of merits.

Result of non-compliance

Despite aforementioned efforts of the SEBI to facilitate achieving minimum shareholding, various companies have not complied with the same. As a result SEBI has taken stern actions like freezing of voting rights, delisting of securities, exclusion of scrips from F&O segments etc.

SEBI has once again vide circular dated October 10, 2017[1], in order to bring uniformity of approach in enforcement of MPS norms and to ensure compliance with same, laid down following procedure:

Steps to be taken by RSE on observing non-compliance

  1. Fine of ₹5,000 per day (₹10,000 per day if non compliance continues for more than 1 year) of non-compliance on the listed entity till the date of compliance. In case the listed entity fails to pay the fine despite receipt of the notice as stated above, the recognized stock exchange may initiate appropriate action.
  2. Freezing of shareholding of promoter/promoter group till the date of compliance (this shall not be an impediment for the entities complying with MPS norms through the methods specified/approved by SEBI).

Provided that where it is observed that the listed entity has adopted a method for complying with MPS requirements which is not prescribed by SEBI under clauses (2)(i) to (vi) under SEBI circular[1] dated November 30, 2015 and approval for the same has not been obtained from SEBI under clause 2 (vii) of the said circular, the recognized stock exchanges shall refer such cases to SEBI.

  1. Promoters, promoter group and directors shall not hold any new position as director in any other listed entity till the date of compliance by such entity (listed entity shall give intimation of the same to RSE and promoters, promoter group and directors)
  2. RSE may consider compulsorily delisting of non-complaint entity in accordance with SCRA, 1956, Rules, 1957 and SEBI (Delisting of Equity Shares) Regulations, 2009.
  3. RSE may keep in abeyance the action or withdraw the action in specific cases where specific exemption from compliance with MPS requirements under the Listing Regulations/ moratorium on enforcement proceedings has been provided under any Act, Court/Tribunal Orders etc.

Upon intimation of compliance and on being satisfied, RSE shall remove the aforementioned restriction levied on the listed entities, its promoter, promoter group and directors.

Aforementioned actions taken by SEBI are without prejudice to its power to take action under the securities laws for violation of the MPS requirements.

International practice

Colombo Stock Exchange

Pursuant to rule 7.13 of the listing rules[2] of the Colombo Stock Exchange, every company listed on the main Board shall maintain a minimum public shareholding as stipulated therein. Previously, such listed companies were required to comply with this requirement of minimum public shareholding by December 31, 2016. However, likewise SEBI, Stock Exchange Commission in consultation with Colambo Sock Exchange has extended the timeline to June 30, 2017 for the listed companies not complying with the requirement of minimum public shareholding.[3]

Europeon Union (Euronext)

Pursuant to the regulations of Euronext Amsterdam[4], minimum public shareholding maintained by the companies shall be 25% of the issued shares of the company. Unlike, SEBI, Colambo Stock Exchange, Euronext considers the free float/liquidity available for the security of the company.  In case a large number of shares of the company are available to public, ensuring enough liquidity for the such shares, irrespective of the percentage, minimum public shareholding may go below 25% subject to the condition that minimum public shareholding shall never be lower than 5% and the free float shall always represent at least EUR 5 million (based on the offering price).