Investor Education and Protection Fund | Complete Overview

(1) The Central Government will set up a Fund to be known as the Investor Education and Protection Fund (herein referred to as the Fund).

(2)There shall be credited to the Fund:-

(a) the sum given by the Central Government by way of grants after due assignment made by Parliament by law for this benefit for being used for the motivations behind the Fund;

(b) donations given to the Fund by the Central Government, State Governments, organizations or any institution for the motivations behind the Fund;

(c) the sum in the Unpaid Dividend Account of companies transferred to the Fund under sub-section (5) of section 124;

(d) the sum in the general revenue account of the Central Government which had been moved to that account under subsection (5) of section 205A of the Companies Act, 1956 (1 of 1956), as it stood preceding the initiation of the Companies (Amendment) Act, 1999 (21 of 1999), and staying unpaid or unclaimed on the beginning of this Act;

(e) the sum lying in the Investor Education and Protection Fund under section 205C of the Companies Act, 1956;

(f) the premium or other income received out of investments produced using the Fund;

(g) the sum got under sub-section (4) of section 38;

(h) the application money received by organizations for allotment of any securities and due for discount;

(I) matured deposits with organizations other than banking organizations;

(j) matured debentures with organizations;

(k) interest accrued on the sums referred to in clauses (h) to (j);

(l) sale proceeds of fractional shares emerging out of issuance of bonus, merger and amalgamation for seven years or more;

(m) redemption amount of preference shares remaining unpaid or unclaimed for seven or more years; and

(n) such other sum as may be prescribed:

Comment: No such amount referred to in clauses (h) to (j) shall form part of the Fund unless such amount has remained unclaimed and unpaid for a period of seven years from the date it became due for payment.

(3) The Fund shall be utilised for -

(a) the refund in regard of unclaimed dividend, matured deposits, matured debentures, the application money due for refund and interest consequently;

(b) promotion of investors' education, awareness and protection;

(c) dispersion of any disgorged sum among qualified and recognizable candidates for shares or debentures, shareholders, debenture-holders or depositors who have endured losses because of wrong activities by any individual, as per the requests made by the Court which had ordered disgorgement;

(d) reimbursement of legal expenses acquired in seeking after class action suits under sections 37 and 245 by individuals, debenture-holders or investors as might be sanctioned by the Tribunal; and

(e) some other reason incidental thereto,

as per such principles as might be prescribed:

Remark: The individual whose sums alluded to in clauses (a) to (d) of sub-section (2) of section 205C moved to Investor Education and Protection Fund, after the expiry of the time of seven years according to provisions of the Companies Act, 1956 (1 of 1956), will be qualified for get refund out of the fund in respect of such claims as per rules made under this section.

Remark: The disgorged amount referred to the sum got through disgorgement or disposal of securities.

(4) Any individual professing to be qualified for the amount referred in sub-section (2) may apply to the position established under sub-section (5) for the payment of the money claimed.

(5) The Central Government will establish, by notification, an authority for organization of the Fund comprising of a chairperson and such different individuals, not surpassing seven and a CEO, as the Central Government may choose.

(6) The way of organization of the Fund, appointment of chairperson, members and CEO, holding of gatherings of the authority will be as per such principles as may be prescribed.

Note: Sub-Section (6) is Notified - aside from regarding the way of organization of the Investor Education and Protection Fund.

Note: Manner of organization of the Investor Education and Protection Fund has been notified on seventh September, 2016

(7) The Central Government may give to the power such offices, officials, employees and different resources as per such principles as might be recommended.

(8) The authority will regulate the Fund and keep up separate accounts and other significant records comparable to the Fund in such structure as maybe prescribed after meeting with the Comptroller and Auditor-General of India.

(9) It will be skillful for the authority comprised under sub-section (5) to go through cash out of the Fund for doing the items determined in sub-section (3).

(10) The accounts of the Fund will be examined by the Comptroller and Auditor-General of India at such intervals as might be indicated by him and such audited accounts along with the audit report subsequently will be sent every year by the power to the Central Government.

(11) The authority will get ready in such structure and at such an ideal opportunity for each financial year as may be prescribed its yearly report giving a full record of its exercises during the financial year and forward a duplicate thereof to the Central Government and the Central Government will cause the annual report and the audit report given by the Comptroller and Auditor-General of India to be laid before each House of Parliament.

IEPF Compliance Checklist for a Financial Year

Updated as per Section 125 of Companies Act, 2013 and Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.