Securities and Exchange Board of India (Sebi) said more than 70% of demat accounts with single ownership have no nomination. This, say legal experts, poses a challenge for legal beneficiaries to claim their shares and dividends. According to industry estimates, around ₹55,700 crore of shares and dividends have been shifted to the government's Investor Education and Protection Fund (IPEF) as they were lying unclaimed in demat accounts for several years. Reena Zachariah explains how shares and dividends become unclaimed investments and what you could do to recover them.
What are unclaimed shares and dividends?
The rules say that if shares and dividends, whether held in dematerialised or physical format, are not claimed for seven consecutive years, then those are marked as unclaimed.
What happens to unclaimed shares and dividends?
They are transferred to the government-run IEPF. Investors/legal heirs will have to claim them from the government.
What are the reasons for these SECURITIES LYING UNCLAIMED?
Sanchit Garg, co-founder of GLC Wealth, said the main reason is that people forget or are unaware of the existence of such investments. They don't share information within the family nor do they transfer information to the next generation. Garg sid some investors still hold shares in physical form. In several cases, the documents are lost, investors have changed addresses, held dormant bank accounts, moved abroad or even passed away. Industry estimates shares worth ₹1.5 lakh crore to ₹2 lakh crore haven't been dematerialised.
How can a legal heir recover these investments?
The entire process takes around one to three years, says Garg, whose firm helps in tracing and recovering lost or forgotten investments. The first step is to collate all information from the records like physical share certificates or dividends, allotment letters, income tax returns, old records or notes of investments maintained by the investor or the family member. The next step is to get the KYC (know your client), signatures, bank and demat account details updated in the company's records. If any share certificates are lost, then an application has to be made for the issue of duplicate shares.
In the case of a deceased shareholder the process of transmission has to be done by legal heirs including the court process depending upon the value of the investments, said Garg. Once the entitlement letter is issued by the company, the legal heir will have to file a claim using IEPF Form 5 on the MCA portal. The physical documents need to be sent to the company, which will file its verification report after which the claim gets approved and the shares are transferred to the legal heir's demat account.