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Many companies came out with an updated list of shareholders who hadn’t claimed their dividends in the last seven years. Such lists are released within 60 days of a company’s annual general meeting. Around 4,000 investors are part of the list of unclaimed dividends for FY22 while the number is far higher if the list of the last seven years is taken. Here is what you should know about unclaimed dividend and the process to claim the same.
Why dividends remain unclaimed
The dividend distributed by a company might remain unclaimed due to various reasons. One, if a person holds shares in physical form and in case of address change, he might not be receiving dividend cheques due to which dividend remains unclaimed. Also, upon death of an investor, if his/her bank account gets closed and the nominee is not mentioned, dividends could be missed. Likewise, there can be other reasons too such as not clearing dividend cheques even upon receiving and name mismatch in bank account.
What happens when there are no takers?
Once a company declares a dividend, it needs to distribute the same in 30 days. A grace period of seven days is given so that portion that remains unclaimed can be availed by the investor, post which the amount is supposed to be transferred to a bank account called Unpaid Dividend Account to be opened by the company in a scheduled bank. After the transfer, the company publishes a list of shareholders and the amount that is unclaimed, apart from their last known addresses. The unclaimed amount stays in the account for seven years during which investors can make an application to the company to claim the dividends. Even after that if any amount remains unclaimed, it is transferred to IEPF (Investor Education and Protection Fund) which is mainly created to safeguard investors’ interests and promote awareness. Along with dividends, all the shares pertaining to unclaimed dividend for seven consecutive years are also transferred to IEPF.
How to stake claims
When the amount lies in the unpaid dividend account and a person claims to be entitled to it, he/she may apply to the company for the payment. In order to avail the unclaimed dividend account from the company’s unpaid dividend account, a request letter needs to be sent to the company’s RTA (Registrar and Transfer Agent) which should contain details such as depository participant ID, client ID, folio number in case of physical shares along with the period for which dividend wasn’t received. These are verified by the RTA. Later, it may issue a demand draft of the unclaimed amount to the claimant.
If not from the unpaid dividend account, one can claim dividend from IEPF which are transferred after seven years. Here, one needs to fill IEPF-5 webform and submit the same upon which an acknowledgement will be generated indicating the SRN (service request number). Then one needs to submit indemnity bond in original, copy of acknowledgement and self-attested copy of e-form along with the other documents as mentioned in the Form IEPF-5 to Nodal Officer (IEPF) of the company at its registered office for verification. After verification, refund can be transferred by IEPF authority to claimant’s bank account through electronic transfer. In case, legal heir of deceased person wishes to claim dividends entitled to the deceased person, documents such as Notarised copy of death certificate. Notarised succession certificate/Probate/Will and No Objection Certificate from other holder, Indemnity Bond for Transmission, among others, should also be submitted.
What you should do
When there is a change in address, bank account or other details, these changes need to be registered with the RTA by the shareholder. In a majority of the cases, dividends remain unclaimed for those with issues arising due to physical share certificates. Getting the shares dematerialised and linking bank account to the demat account enables payment of dividends through ECS (Electronic Clearing Service) mode directly to bank instead of collecting cheques.
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