Companies seek clarity on IEPF norms; cite practical problems

Facing practical difficulties, companies have sought clarity on IEPF norms from the government on transfer of physical shares, levy of stamp duty and other issues.
With the recently implemented regulations requiring them to make public the details of shareholders in the context of unclaimed dividend amount, companies have also sought relaxation in such rules.
Corporate Affairs Ministry, which is implementing the Companies Act, 2013, came out with a set of norms pertaining to Investor Education and Protection Fund (IEPF) effective from September 7 onwards.
Sources said many companies have approached the ministry seeking clarity and possible relaxations with respect to certain aspects of the IEPF (Accounting, Audit, Transfer and Refund) Rules 2016.

Among others, IEPF can be utilised for refund in respect of unclaimed dividends, matured deposits and matured debentures.
Some companies that have approached the ministry have contended that implementation of the rules in the current firm might not be "practically feasible".

Rather than publishing notice in newspapers with details of shareholders whose shares are due for transfer to IEPF, companies have suggested having in place a format where the aggregate details of such shares are published.
Sources said that such a format would also help in curbing fraudulent claims as unscrupulous elements could misuse details of shareholders when made public.

One of suggestions is that share transfer related rules need to be revisited and relaxations be made in terms of compliance requirements till the revised ones are in place.
Sources said a major operational impediment being seen by companies is in transfer of shares kept in the physical form to the IEPF as there are a lot of procedural requirements to be followed when such shares are transferred.
For the purpose of transferring shares held in physical form to IEPF, companies are required to issue duplicate shares, in lieu of current valid shares.
With respect to issuance of duplicate shares, many companies have elaborate procedures laid out in their Articles of Association.

Besides, firms are awaiting clarity on levy of stamp duty on the share transfer form and who would be bearing that cost.
Another issue flagged by the companies is that there is no specific guidance on depositories and depository participants with regard to transfer of shares to the IEPF, sources said.
According to them, such a guidance is required since depositories and depository participants would be involved in transfer of shares held in the demat form.