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Recovery Of Shares: Meaning, Eligibility, Documents Required, Time involved

A SEBI report stated that around 70% of India's demat accounts have single ownership and no nomination. At the same time, another industry estimate predicted a total sum of ₹55,700 crore of shares and dividends lying in the IEPF unclaimed in demat accounts for several years. The compulsory dematerialization of share certificates led to a large number of unclaimed shares, which motivated the Ministry of Corporate Affairs to introduce the Investor Education and Protection Authority to hold such unclaimed shares and dividend accrued upon them and to afford them protection and ultimately transfer the shares and dividend to the eligible claimant as per the due process of law. Read further to learn the meaning of the recovery of shares, the critical responsibilities of IEPF, various kinds of recovery of shares, the process to apply for the recovery of shares, and the documents required to be attached to the form.

Table of Content

Why is a Claim for Recovery of Shares Needed from the IEPF?

Investors may fail to claim their shares from the company and need to make an application for recovery due to the following reasons:

  • Change of Location: Investors may receive notices related to company events or dividend announcements at their old addresses if they fail to update their contact information.
  • Death of the Original Shareholder: The legal representatives may be unaware of the shares owned by the deceased shareholder, preventing them from taking ownership or receiving benefits such as interest or dividends.
  • Non-transfer of Ownership: Shares may remain unclaimed if they were transferred or provided without the necessary paperwork or follow-up. This situation may arise due to:
    • Business mergers, changes in the entity's name, or any form of reorganization.
    • Changes in legal provisions or compliance standards that complicate share recovery.
  • Loss of Paper Certificates: Physical share certificates that have been dematerialized later may go unclaimed because they are misplaced, torn, or forgotten.

Kinds of Recovery of Shares In India

  • Shares Transmission from Shareholder to his legal beneficiaries - Transfer of shares from original shareholders to their legal beneficiaries due to reasons such as marriage, lunacy, insolvency, or death. Legal heirs claiming recovery of shares from IEPF fall under this category.
  • Recovery of lost shares - Shareholders who had long lost their physical share certificates, making it challenging to recover shares, shall claim recovery under this category.
  • Issue of duplicate shares - Investors who failed to convert their shares into demat form in accordance with SEBI regulations may apply for recovery of shares in demat form.
  • The claim of unclaimed shares from IEPF - The transfer of share certificate title from the transferor to the transferee is known as the Transfer of Shares. An investor applying to recover lost, forgotten, or neglected shares from IEPF falls into this category.
  • Unpaid Dividend - Apart from the unclaimed shares held with the IEPF authority, the investor or their legal heir may also seek recovery of unpaid dividends and accrued interest from the IEPF authority.

Who is an eligible person to seek recovery of shares from IEPF?

Shareholders, their nominees, or legal beneficiaries whose shares have been unclaimed are eligible through application in a specified form. However, such applicants shall be eligible to bring only once in a financial year. Where the original investor (but his legal heir, nominee, or successor) is not making the claim the person shall ensure that the concerned company has completed the share transmission procedure first and provides a letter of entitlement before raising a claim for recovery of shares with the authorities.

Documents Required For Recovery of Shares

  • PAN/Aadhar Card/Passport/Voter Card, etc. for proof of identification of the applicant.
  • Utility Bills/Bank transaction statements/ Aadhar/Voter Card etc. for proof of residence.
  • Information including transaction receipts, share certificates, demat a/c details, or other records to support valid claims for ownership of shares.
  • Declaration filed by the company stating enclosure of the unclaimed shares.
  • Bank details along with a canceled cheque.
  • Passport-size photo of the applicant (recent).

Process of Recovery of Shares

Recovery of Shares process aims to recover the shares from Investor Education and Protection Fund to the concerned person. There is a process recovery of shares is as follows:

  • Ascertain Share Custody

    Ascertain whether or not the shares have been held in the custody of IEPF authority, sign in to the IEPF portal and look for the Claim Refund option. Fill in details such as PAN or folio numbers to start the Search.

  • File Form on the Portal

    Find IEPF has held shares, start the process by submitting the form for recovery of shares through the IEPF portal, select the form, and claim a Refund.

  • Upload Documents

    Upload the required documents and attach requisite documents to substantiate the claim for recovery including PAN, Aadhar card, bank details, or canceled cheque, along with a copy of the physical share certificate.

  • Application submission

    Submit the form with an attachment, click submit and an acknowledgment receipt containing a unique reference number will be generated. Keep track of the claim progress through the reference number generated.

Time Involved in Recovery of Shares

The Nodal officer will upload the application on the MCA portal which will later be thoroughly verified by the IEPF authority. Once the authority is verified of its genuineness, it may approve the application and get the transfer of shares and dividends effectuated within 1-2 months until which the progress could be tracked through the generated reference number.

IEPF Authority - Roles and Responsibilities

The IEPF Authority is responsible for the following:

  1. Overseeing the use and administration of the IEPF funds, holding unclaimed shares and dividends, and providing refunds upon receiving genuine claims for recovery.
  2. Deriving Investor Protection by educating investor awareness.
  3. Accountability for maintenance of separate records with respect to the unclaimed shares transferred from the company and records for dividend and interest accrued thereupon.
  4. Collecting and directing unclaimed funds towards various investor welfare initiatives to educate and protect investors and to encourage corporate social responsibility activities.
  5. Enabling the use of unclaimed funds towards investor welfare to build confidence and raise awareness in financial markets..

Why Choose BizFoc?

At BizFoc, we have a unique team of experts with years of experience to find solutions for all your woes related to the recovery of shares under one roof. Our unique features include-

  • Expert Team of Professionals to guide and assist you with end–to–end support from registration to fulfillment of legal processes.
  • Round-the-clock presence to hear your concerns.
  • Efficient Services with reasonable charges in a timely manner.

Conclusion

Therefore, the Ministry of Corporate Affairs and the IEPF Authority have collaborated to offer a quick, simple, and effective remedy to reclaim their shares and added benefits in a hassle-free manner. There may be instances where certain shareholders such as senior citizens, NRIs, or their legal heirs of original shareholders, etc. may find the process challenging and may consider getting advisory assistance from experienced professionals at BizFoc.

FAQs Related To Recovery of Shares

Investors who have filed a claim with the IEPF authority online through the form IEPF-5 will receive an acknowledgment with a unique Service Request Number (SRN) that could be used to keep track of the application through the MCA portal that also displays the stage of the claim as the under scrutiny, forwarded to IEPF authority, further documents required, etc.

If your claim for recovery of shares from IEPF has been rejected recently, follow the steps as provided below-

  • Find out the cause for claim rejection, which could be any inconsistency or discrepancy in the information submitted or any missing information.
  • Study the remarks made by the Nodal Officer rule out any deficiencies and prepare documents supporting your claim.
  • The claimant re-submitted or signed the file application letter and revised documents to the Nodal Officer.
  • Submit supporting documents to restart the authentication process.
  • Offer quick replies for any remarks or explanations and follow up regularly.

The Companies Act and SEBI regulations have not prescribed any limitation of time to bring a claim for recovery of shares by the shareholder or his legal beneficiary, but typically the process may take a minimum of one-month minimum to a maximum of one year depending upon the case.

In accordance with the SEBI regulations, a stock broker shall be eligible to file a claim for recovery of shares for his clients provided such a broker has a valid Power of Attorney (POA) through which the client authorizes his broker.

  • Complete the name of the Business entity along with its corporate identification number.
  • Kind of company (Public/Private/One Person Company).
  • Details regarding payment of last dividend or date on which shares were transferred to IEPF.
  • Total number of shares and face value in which they were issued.
  • Dividend sum, which is subject to claim.
  • Registered Address of the entity.
  • Contact information of the concerned Nodal officer.

  • Succession Certificate - Issued by a court of competent jurisdiction declaring a person the rightful owner where the original shareholder has deceased.
  • Will Probate - Declares the rightful heir based on the original shareholder's will.
  • Legal Heir Certificate - Granted by a revenue office or court, declaring the names of all eligible legal heirs of the deceased person.
  • Death Certificate of the original shareholder.
  • Indemnity - An indemnity certificate submitted by all the deceased shareholder's legal heirs before the transmission of shares or payment of dividends.

  • Details of the applicant fail to match with the PAN databases.
  • Details of the shareholder do not match with the beneficiary.
  • Failure to match related bank details or demat account details.
  • Lack of claim supporting documents.
  • Details of the total dividend accrued are different from the amount held with IEPF.

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