Recovery of Shares from IEPF: A Complete Legal & Procedural Guide

Recovery of shares transferred to the Investor Education and Protection Fund (IEPF) is a statutory right available to shareholders and their legal heirs under Indian law. Many investors lose track of their shareholdings due to non-updation of KYC, change in address, death of the shareholder, or lack of awareness about unclaimed dividends. When dividends remain unpaid for seven consecutive years, the corresponding shares and dividend amounts are transferred to the IEPF.

However, such transfer does not extinguish ownership rights. The law provides a structured mechanism through which rightful claimants can recover both shares and dividends by following prescribed procedures and submitting appropriate documentation.

Legal Framework Governing Recovery of Shares

Companies Act, 2013

The recovery process is governed primarily by Sections 124 and 125 of the Companies Act, 2013. These provisions mandate the transfer of unpaid dividends and corresponding shares to the IEPF after seven years while preserving the right of shareholders to claim them back.

IEPF Authority Rules

The IEPF Authority (Accounting, Audit, Transfer and Refund) Rules lay down the procedural framework for claiming shares, including filing of Form IEPF-5, documentation requirements, verification by the company, and approval by the Authority.

When Shares Are Transferred to IEPF

Shares are transferred to the IEPF when dividends declared on such shares remain unclaimed or unpaid for seven consecutive years. The transfer applies to both physical and dematerialised shares. Bonus shares, split shares, and corporate action benefits attached to such shares are also transferred along with the original holding.

Eligibility to Recover Shares

The following persons are eligible to file a claim:

• Original shareholder

• Legal heir or nominee

• Successor under succession certificate or probate

• Surviving joint holder
  Ownership rights continue even after IEPF transfer, subject to verification and compliance with rules.

Process for Recovery of Shares

Step 1: Identification of Unclaimed Shares

The claimant must first verify whether shares have been transferred to IEPF by checking company records or IEPF databases using folio number or demat details. This step helps identify the exact number of shares and dividend amounts involved.

Step 2: Contacting the Company or RTA

The shareholder must approach the company’s Registrar and Share Transfer Agent (RTA) to obtain an Entitlement Letter confirming the transfer of shares to IEPF and listing the documents required for filing the claim.

Step 3: Filing Form IEPF-5

The claimant must file Form IEPF-5 electronically on the MCA portal with details of shares, dividends, bank account, demat account, and personal identification. On submission, an SRN and acknowledgment are generated.

Step 4: Preparation of Physical Documents

A complete document set must be prepared, including the signed IEPF-5, indemnity bond, advance stamped receipt, entitlement letter, KYC documents, demat proof, and share certificates (if physical).

Step 5: Submission to Company’s Nodal Officer

The physical documents must be sent to the company’s designated IEPF Nodal Officer for verification. Accuracy and completeness at this stage are critical to avoid delays.

Step 6: Verification by the Company

The company verifies the claim with its records and submits a verification report to the IEPF Authority within the prescribed timeline.

Step 7: Approval by IEPF Authority

Upon satisfactory verification, the IEPF Authority approves the claim and instructs credit of shares to the claimant’s demat account and transfer of dividend amounts to the bank account.

Special Situations in IEPF Recovery

Recovery by Legal Heirs

Legal heirs must submit death certificate, succession documents, and NOCs from other heirs if applicable. These cases involve enhanced scrutiny and longer timelines.

Physical Share Certificates

Physical shares must be dematerialised before recovery. Original certificates are required, and recovered shares are credited only in demat form.

NRIs and Foreign Claimants

NRIs can claim shares by submitting passport, overseas address proof, and FEMA-compliant bank and demat details.

Recent Regulatory Focus

Regulators have strengthened scrutiny on documentation quality, identity verification, and fraud prevention. Digital records, consistent signatures, and complete audit trails are now essential. Companies are expected to process claims diligently, while claimants must ensure strict compliance with procedural requirements.

Conclusion

Recovery of shares from IEPF is a legally protected right designed to safeguard investor interests even after prolonged inactivity. While the process involves multiple steps, regulatory checks, and documentation, it ensures transparency, authenticity, and protection against misuse. Shareholders and legal heirs who follow the prescribed procedure carefully can successfully reclaim their investments. Regular monitoring of dividends, timely KYC updates, and proactive engagement with companies can prevent future transfers to IEPF and ensure uninterrupted ownership benefits.