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Unpaid Dividend Account - Sec. 124 Of Companies Act 2013

Updated: Jun 24



Meaning of Dividend


In general, a dividend is a portion of a company's earnings that is delivered to its shareholders. A dividend is defined as a specified proportion of profit from a company's net profit for a financial year that is not held in the firm and has been distributed among the company's shareholders under Section 2 (35) of the Companies Act of 2013.


Provisions of Section 124


Section 124 of the companies Act, 2013, discusses the unpaid dividend account:

Sec. 124. (1) Where a dividend has been declared by a company but has not been paid or claimed within thirty days from the date of the declaration to any shareholder entitled to the payment of the dividend, the company shall, within seven days from the date of expiry of the said period of thirty days, transfer the total amount of dividend which remains unpaid or unclaimed to a special account to be opened by the company in that behalf in any scheduled bank to be called the Unpaid Dividend Account.


Sec. 124. (2) The company shall, within a peri day of making any transfer of an amount under sub-section (1) to the Unpaid Dividend Account, prepare a statement containing the names, their last known addresses, and the unpaid di, dividend to be paid to each person and place it on the website of the company, if any, and also on any other website approved by the Central Government for this purpose, in such form, manner, and other particulars as may be prescribed.


Sec. 124. (3) If any default is made in transferring the total amount referred to in sub-section (1) or any part thereof to the Unpaid Dividend Account of the company, it shall pay, from the date of such default, interest on so much of the amount as has not been transferred to the said account, at the rate of twelve percent. per annum and the interest accruing on such amount shall enure to the benefit of the members of the company in proportion to the amount remaining unpaid to them.

Sec. 124. (4) Any person claiming to be entitled to any money transferred under sub-section (1) to the Unpaid Dividend Account of the company may apply to the company for payment of the money claimed.

Sec. 124. (5) Any money transferred to the Unpaid Dividend Account of a company in pursuance of this section which remains unpaid or unclaimed for seven years from the date of such transfer shall be transferred by the company along with interest accrued if any, thereon to the Fund established under sub-section (1) of section 125 and the company shall send a statement in the prescribed form of the details of such transfer to the authority which administers the said Fund and that authority shall issue a receipt to the company as evidence of such transfer.

Sec. 124. (6) All shares in respect of which 1[dividend has not been paid or claimed for seven consecutive years or more shall be] transferred by the company in the name of Investor Education and Protection Fund along with a statement containing such details as may be prescribed:


Provided that any claimant of shares transferred above shall be entitled to claim the transfer of shares from Investor Education and Protection Fund following such procedure and on submission of such documents as may be prescribed.



[Explanation.For the removal of doubts, it is hereby clarified that in case any dividend is paid or claimed for any year during the said period of seven consecutive years, the share shall not be transferred to Investor Education and Protection Fund.]


Sec. 124. (7) If a company fails to comply with any of the requirements of this section, such company shall be liable to a penalty of one lakh rupees and in case of continuing failure, with a further penalty of five hundred rupees for each day after the first during which such failure continues, subject to a maximum of ten lakh rupees and every officer of the company who is in default shall be liable to a penalty of twenty-five thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees.



Fine:

If the company fails to transfer the total amount referred to in sub-section (1), or any part of it, to the Unpaid Dividend Account, it shall pay interest on the portion of the amount that has not been transferred to the said account, at a rate of 12% per annum, from the date of such default, and the interest accruing on such amount shall ensure to the benefit of the company's members in proportion to the amount remaining unpaid to them.



Transfer of Dividend:

Any money transferred to a company's Unpaid Dividend Account under this section that remains unpaid or unclaimed for seven years (7 years and 37 days from the date of dividend declaration) from the date of such transfer shall be transferred to the Investor Education and Protection Fund, along with any interest accrued thereon. The company must provide a statement in the appropriate form detailing the specifics of the transfer to the authority that administers the Fund, and that authority must issue the company a receipt as proof of the transfer.


Transfer of Shares

All shares in respect of which dividend has not been paid or claimed for seven consecutive years or more shall be transferred by the company in the name of Investor Education and Protection Fund along with a statement containing such details as may be prescribed:


Is it possible for a shareholder to receive a transfer of shares or a dividend from the Investor Education and Protection Fund?


Yes, every claimant of shares transferred above has the right to claim the transfer of shares from the Investor Education and Protection Fund by following the procedure and submitting the paperwork outlined below.


Process of transfer of dividend to Investor Education and Protection fund

As pounds Investor Education and Protection Fund Authority (Accounting, Audit, Transfer, and Refund) Rules, 2016 dated 05th September 2016:

  1. Within 30 days of the money being due, the Company will credit it to the Investor Education and Protection Fund.

  2. The amount will be presented by the companies together with a challan (in triplicate) to the designated Bank Branches, who will return two copies of the challan to the company, duly stamped as proof of receipt of the amount.

  3. Every company must file one copy of the challan indicating deposit of the amount to the Fund with the relevant Authority, along with the complete particulars of the amount tendered, including the account head to which it has been credited.

  4. Within thirty days of submitting the challan, the company must submit to the Authority a Statement in Form No. IEPF 1 includes information on the transfer, along with a copy of the challan.

  5. The Company shall keep a record of the person whose unpaid or unclaimed amount has remained unpaid or unclaimed for seven years and has been transferred to the fund, including the person's name, last known address, amount, folio number or client I, D, certificate number, beneficiary details, and so on, and the authority shall have the power to inspect such records.


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