Government to Issue Rules on Unclaimed Dividends

The government is likely to seek better discipline from companies on unclaimed investor funds that they may be holding on account of deposits or dividends.

The ministry of corporate affairs data shows unpaid and unclaimed amounts with companies stood at Rs 700 crore at the end of FY2013.
To begin with, the corporate affairs ministry will identify companies that have such funds but have not disclosed it to the Registrar of Companies, a ministry official told ET.

The ministry will issue guidelines on unclaimed dividends. Currently, dividends are usually credited to investor accounts electronically, but this information may not have been provided or the shareholder may have shifted home, leaving the money unclaimed.

Based on amount and location, companies will be grouped into various categories.

The Companies Act of 1957 mandates that dividends not paid or claimed in 30 days are transferred to a separate bank account. Investors can claim the amount from this account anytime in the next seven years. After that, most of it goes to the Investor Education and Protection Fund (IEPF) managed by the corporate affairs ministry.

"Unfortunately, penalties for non-compliance with this provision are not severe under old Companies Act," said Abhyudaya Agarwal, co-founder, iPleaders, a Delhi-based legal education venture. This raises the concern that companies may be tempted to transfer funds from the unpaid dividend account back to their balance sheets, said the person cited above.

Economic Times, New Delhi, 05-11-2013