The companies have several cases where dividend payment has to be kept separately due to issues pertaining to ownership dispute, court orders, and objections from transferor etc.
The companies receive various claims from shareholders whose dividend amounts have been kept separately and independently by us due to reasons mentioned above. Among other things, such investors always request the company not to transfer such dividend amount to Investor Education and Protection Fund and pay the same to concerned party only after settlement of the dispute. In these cases, the company usually face the problem that Whether the company can keep back the transfer of unpaid amount of dividend to Investor Education and Protection Fund in respect of disputed cases where title to ownership of shares is under dispute and if it is under dispute then whether company can pay the amount of dividend unpaid to the related party after the resolution of the dispute?
Irrespective of theprovisionsof the company law, Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001 suggests the transfer of unpaid dividend amount to IEPF.
Dividend should be paid to the shareholders those hold shares in electronic form, and to those persons whose names are as beneficial owners in the statement(s) supplied by the Depository as on the closing of the market day before the book closure or, in the case of interim dividend, whose names are there on the record date; (ii) to shareholders those hold shares in physical form, to those Shareholders whose names are on the company’s register of members after attaining all valid share transfers in physical form registered with the company prior to the date of closure of book or, in the case of Interim Dividend, on the record date; and (iii) in case of share warrants, to be paid the persons holding such warrants.
The amount of dividend after deduction of tax should be deposited in a separate bank account within five days from the date of declaration of dividend. Dividend should be paid within thirty days of declarationfrom bank account.
The amount of dividend in respect of shares which have not been registered for any valid reason for which an instrument of transfer has been tendered to the company should be
If a member gives in writing authority to the company to pay the dividend to the transferee mentioned in the instrument of transfer, then the company should make use of such authorization.But , in the case of shares which have not been transferred due to the ownership dispute, or where prohibitory orders have been passed by a court or statutory authority, dividend should be kept separately by transferring to the Unpaid Dividend Account.
The amount of dividend that is unpaid or unclaimed after thirty days after the date of declaration should be transferred to a dividend account,which will be called ‘Unpaid Dividend Account’ of the company, This should take place within seven days from the date of expiry of the thirty days of period provided for payment of dividend.
The details of unpaid or unclaimed dividendshould be maintained by the company and settle the amounts thereof with the apprehensive bankers, periodically.
If Any amount that remains as unclaimed and unpaid for a period of seven years from the date of transfer of such amount to the Unpaid Dividend Accountin the Unpaid Dividend Account of the company should be transferred to the Investor Education and Protection Fund.
After expiry of seven years from the date of transfer to the Unpaid/Unclaimed Dividend Account.
transfer to the Investor Education and Protection Fund should be made within thirty days of theCompany should intimate to the members in regard of whose unclaimed dividend the amount is being transferred, at least six months before the due date of such transfer.
After the expiry of the period of seven years from the date from which unclaimed and unpaid dividends were transferred to the Unpaid Dividend Account, no claims shall lie against the Fund or the company in respect of any such amounts. Hence intimation to the concerned members , should be given by the company individually about the amount of dividend remaining unclaimed which is liable to be transferred to the Investor Education and Protection Fund and then can advise the member to claim such amount of dividend from the company before such transfer.
In terms of Section 206, dividend should be paid to the registered holder of the share or to his order or to his bankers. But when the registered shareholder has given authority to the company, in writing, to pay the dividend to the transferee, as specified in the instrument of transfer, the company should act after such authority as per mentioned under Section 206A.
Dividend is payable to the shareholder whose name appears in the register of members on the relevant date even if, prior to that date, he has sold the shares but the transfer deed in respect thereof has not been blocked with the company
The companies shall transfer the amount of unpaid dividend to the unpaid dividend account as per mentioned in section 205A and after the expiry of seven years, the balance of unpaid dividend for particular year should be transferred to IEPF. There is no provision for any contingency in the provision for transfer of such unpaid or unclaimed dividend to IEPF. However, this could be held back only on specific directions from any Court or Tribunal or Consumer Forum to that effect.
In case there is a dispute regarding shares on which dividend is payable, the company should transfer the amount of such dividend to the Investor Education and Protection Fund after the expiry of seven years from the date of declaration of dividend, unless a court order provides otherwise.
Written By,
Dr Smita Jape
Assistant Professor, BRIMS
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