Ministry seeks legal reform to ease transferring shares from firms to govt

The amendment, the officials said, would centralise and smoothen the process of share transfer, besides addressing the problem of unclaimed dividends, which currently stand at Rs 2,000 crore

The Ministry of Corporate Affairs (MCA) is pushing for an amendment to the Companies Act to shift the task of transferring shares from companies to the government.

The amendment, the officials said, would centralise and smoothen the process of share transfer, besides addressing the problem of unclaimed dividends, which stand at Rs 2,000 crore.

After the changes to the Companies Act, the claimant has to approach the government to transfer shares in his or her name, said senior ministry officials. 

“At present, the company transfers shares, but we want to start doing that. The holder has to approach the government when the amendments are done,” a senior official said.

The officials are making this proposal, to be put before the next government, because the model code of conduct is in place at present.

Share transfer is usually done in the case of the death of the shareholder. 

 At present, the legal heir gets in touch with the company for a transfer. 

However, the government wants to centralise this process by asking all applicants to come to it. 

If the amendment goes through, the Investor Education and Protection Fund Authority (IEPFA) will be given this task. Since unclaimed dividend lies with the IEPFA, transferring the task of share transfer to it will smoothen the process, officials said.

Also, it will be much easier for the IEPFA to verify the claims than for companies to do, they said. 

Currently, unclaimed shares have piled up. More than 400 million shares have been transferred to the IEPFA. The value of these shares runs into billions of rupees.

The IEPFA has unclaimed dividend ranging from a few thousand rupees to many hundred thousands.

Most people who have not claimed their dividend have physical shares and have either lost their certificates or forgotten to claim it. 

The IEPFA engages with investors in paying their unclaimed dividend when they apply to it. Companies have to open a separate bank account for unpaid dividend. 

The MCA set up the IEPFA in September 2016 for administering investor education and protection funds under Section 125 of the Companies Act, 2013. 

In November 2017, the government made it mandatory for companies to transfer unclaimed dividend to the IEPFA. Besides this, the IEPFA is entrusted with refunding shares, matured deposits, debentures, etc. to investors and promote awareness among them.