IEPF Transfer of Unclaimed Dividend and Shares: The 7-Year Rule That Sends Investor Shares to the Government

IEPF Transfer of Unclaimed Dividend and Shares: The 7-Year Rule That Quietly Hands Investor Shares to the Government

Last updated: 15 August 2026 · By CS Sapna Malpani, Practising Company Secretary, Bangalore

On 29 June 2026, the Registrar of Companies at Gwalior passed four orders against EKI Energy Services and its officer in default, together adding up to a penalty of ₹15.64 lakh. One head of default: the prescribed details under Rule 5(8) of the IEPF Rules were never attached to Form IEPF-2. A missing attachment on a routine annual filing turned into a six-figure penalty. That is the quiet side of the IEPF transfer of unclaimed dividend and shares regime, and most private company boards discover it only after a notice lands. If your company has ever declared a dividend, Section 124 of the Companies Act, 2013 is already counting the days for you.

The problem: a dividend you paid years ago can still penalise you today

Section 124 deals with money that a company set aside for shareholders but never actually paid out. A shareholder shifts house, a warrant is never encashed, a bank account goes dormant, an NRI folio is forgotten. The company did nothing wrong when it declared the dividend. The default happens later, in the housekeeping.

The law treats that forgotten money in stages. When a dividend is declared but stays unpaid or unclaimed for 30 days, the company has 7 more days to move the whole unpaid amount into a separate Unpaid Dividend Account in a scheduled bank (Section 124(1)). Within 90 days of that transfer, the company must publish a statement of names, last known addresses and unpaid amounts on its website and on any MCA-notified site (Section 124(2)). If the money then sits unclaimed for a continuous period of seven years, it goes to the Investor Education and Protection Fund along with any interest (Section 124(5)). And this is the part that surprises boards: the shares on which that dividend went unclaimed for seven straight years are transferred to the IEPF as well (Section 124(6)).

The scale is not trivial. Parliament data placed over a billion shares lying with the IEPF, and the queue of investors trying to reclaim them grows every year. For a company, every one of those transferred shares started as an ordinary line in a members’ register that nobody reconciled. For an IPO-bound company, an unreconciled IEPF liability is exactly the kind of finding that a merchant banker’s due diligence flags before a DRHP.

Who this hits hardest

Private limited companies in the ₹5 crore to ₹500 crore band often assume IEPF is a listed-company problem. It is not. The obligation attaches to the act of declaring a dividend, not to being listed. A profitable private company that has paid dividends for a decade to a spread of family members, ex-employees who held sweat equity, or early angels who moved abroad is squarely inside Section 124. The annual Form IEPF-2 statement applies even before any seven-year clock runs out, which is why the EKI order matters to every dividend-paying company, not only to the ones about to transfer shares.

The 7-year journey of an unclaimed dividend

What the enforcement pattern is telling companies

Through 2025 and 2026, Registrars across India have moved IEPF defaults from the “we will send a reminder” pile into adjudication. The EKI Energy Services orders are a clean example. ROC Gwalior did not wait for a shareholder complaint; it read the filings, found that the details required under Rule 5(8) were not attached to the IEPF-2 for the relevant years, and treated the omission as a default under Section 125(2)(c) read with Section 124(7). Four orders, ₹15.64 lakh, one company.

The reason enforcement is easy here is that the evidence sits inside the company’s own MCA filings. An adjudicating officer does not need an inspection to prove that an IEPF form is late or that an attachment is missing. That makes IEPF one of the lower-effort, higher-yield areas for the ROC, and it is why boards that treat the annual IEPF statement as a formality are exposed.

By the numbers

What you must do now: the IEPF compliance run-through

IEPF is a process you can get on top of in one focused review. This is the sequence a practising Company Secretary follows.

1. Reconcile the Unpaid Dividend Account, year by year. Pull the ledger for every dividend declared in the last eight years and match it against what was actually encashed. Build a folio-level ageing list so you can see exactly which amounts are approaching the seven-year line and which shares ride on them.
2. Appoint a Nodal Officer for IEPF and file the details. Every company must designate a Nodal Officer (and, if needed, a Deputy Nodal Officer) responsible for IEPF coordination and for verifying investor claims, and file the details with the IEPF Authority. Publish the Nodal Officer’s name and email on your website. A missing Nodal Officer is a standalone default.
3. File Form IEPF-2 within 90 days of the AGM. This is the annual statement of unclaimed and unpaid amounts under Rule 5(8). Attach every prescribed detail. The EKI order shows the ROC reading the attachments line by line, so an incomplete IEPF-2 is as risky as an unfiled one.
4. Send the 3-month individual intimation. For shares about to complete seven years, write to each affected shareholder at their latest recorded address at least three months before the transfer date. The letter must state the folio or DP ID and Client ID, the unclaimed years, the due date, and the exact steps to claim before transfer.
5. Pass a Board resolution and publish a newspaper notice. The Board approves the transfer and authorises the Company Secretary or a Director to sign the paperwork. Simultaneously, publish a notice in one English and one regional-language newspaper of wide circulation, pointing readers to the list of affected shareholders on your website.
6. Effect the transfer through corporate action. For demat shares, initiate a corporate action with the depository to move the shares to the IEPF Authority’s demat account. For physical shares, issue a duplicate certificate in Form SH-1 marked “Issued in lieu of share certificate no. … for the purpose of transfer to IEPF”, dematerialise it, and then transfer.
7. File Form IEPF-1 and Form IEPF-4. Form IEPF-1 covers the unclaimed dividend amounts moving to the Fund. Form IEPF-4 reports the share transfer and must be filed within 30 days of the corporate action, with the newspaper notice attached. Preserve the corporate action records.
8. Keep the website list current and honour claims. Update the website with names, folio or DP ID and Client ID, and number of shares transferred. When a rightful owner later files Form IEPF-5, verify and forward the claim within the prescribed timeline so the shareholder can recover from the Fund.

A common error worth calling out: companies forget that all benefits on IEPF-held shares, such as bonus and split shares, are credited to the IEPF demat account, while a rights issue is treated differently. Another is the voting position, which brings us to the finer points.

The deeper implication

According to CS Sapna Malpani, the shift that boards keep missing is that IEPF is no longer a dividend-desk task; it has become a governance test that shows up in due diligence. Shares held by the IEPF carry frozen voting rights until they are reclaimed, yet they still count towards total voting capital when thresholds under the SEBI Takeover Regulations are computed. For a company preparing to raise capital or list, an unreconciled block of IEPF shares distorts the cap table and invites a diligence query at the worst possible moment. The registers you keep clean today are the registers an investor’s counsel reads tomorrow.

The direction of travel is one-way. The IEPF Authority has been tightening claim verification timelines and pushing companies to keep accurate Nodal Officer records and web disclosures. Expect Registrars to keep mining IEPF filings for easy, self-evident defaults, and expect the reconciliation burden to sit with the company rather than the investor. Companies that build an annual IEPF review into their compliance calendar will treat each transfer as routine; companies that do not will keep meeting the ROC through adjudication orders.

IEPF forms and provisions, side by side

Boards often confuse the four IEPF forms and the two governing sections. Here is the map.

Sources and references

• Section 124, Companies Act, 2013 (Unpaid Dividend Account), IBC Laws
• Section 124, CAIRR / Companies Act Integrated Ready Reckoner, ca2013.com
• Rule 6, IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, ca2013.com
• Transfer of Shares to IEPF: Procedure under Companies Act & IEPF Rules, TaxGuru
• ROC Gwalior imposes ₹15.64 lakh penalty on EKI Energy Services (IEPF filing lapses), ScanX
• FAQs on transfer of unpaid dividend and underlying shares to IEPF, Vinod Kothari Consultants
• IEPF Authority (claim and refund portal), iepf.gov.in

Frequently asked questions