# Investor Education and Protection Fund (IEPF) — Section 125

## Who Establishes the Fund?

The Central Government establishes IEPF. It is the residuary destination for unclaimed investor money in India.

## Two-sided View — Credits vs. Utilisation

### A. What Gets CREDITED to the Fund

1. Grants by the Central Government (after appropriation by Parliament).

2. Donations by CG, SG, any company, or institution.

3. Amounts in Unpaid Dividend Account (UDA) transferred to IEPF.

4. Amounts unclaimed and unpaid for 7 years from due date (along with interest):

Application money received for allotment due for refund;
Matured deposits (except those of banking companies);
Matured debentures.

5. Amounts unclaimed and unpaid for 7 years:

Sale proceeds of fractional shares arising from bonus issue, merger, or amalgamation;
Redemption amount of preference shares;
Shares whose dividend is unclaimed/unpaid (and their benefits).

6. Amounts of disgorgement and proceeds of disposal of securities seized from persons convicted of personation in acquisition of securities.

7. Interest and other income from investments made out of IEPF.

8. Sums received by IEPF Authority from any source decided by CG.

### B. How the Fund is UTILISED

1. Refund of:

Unclaimed dividend,
Matured deposits,
Matured debentures,
Application money due for refund, and interest thereon.

2. Promotion of investors' education, awareness, and protection.

3. Distribution of disgorged amount to eligible & identified persons who suffered loss due to wrong actions.

4. Reimbursement of legal expenses for class action suits by members, debenture holders, or depositors.

5. Other incidental purposes.

## Authority for Administration

### Composition of IEPF Authority

Secretary, MCA — ex-officio Chairperson.
Chief Executive Officer (CEO) — Convenor.
6 or 7 members.

### Functions

Administer the Fund.
Maintain accounts & records of IEPF in the form prescribed (after consultation with CAG).
Accounts shall be audited by CAG at intervals specified by him.
Authority forwards audited accounts + audit report annually to CG.
Authority prepares an annual report of the FY (account of its activities) and forwards a copy to CG.
CG lays the annual report and audit report before each House of Parliament.

## Reclaim by Investor

A person entitled to shares, dividend, or other amounts in IEPF can reclaim them through an online application to the IEPF Authority following the prescribed procedure.

## Memory Aid — "7 Years is the Magic Number"

Most items hit IEPF after 7 years of being unclaimed — dividend, application money, matured deposits, matured debentures, fractional share proceeds, preference share redemption, and the underlying shares themselves.

Worked example

### Example 1

Example: P Ltd.'s shareholders did not claim dividend declared in FY 2017-18. The unpaid amount was transferred to UDA in May 2018. Since the dividend remains unclaimed for 7 years after transfer to UDA (i.e., by May 2025), the amount, along with the underlying shares, is transferred to IEPF.

### Example 2

Example: A class action suit is filed against a director who siphoned company funds. The court orders disgorgement of ₹50 crore. This amount is credited to IEPF and is then used to compensate identified shareholders who suffered the loss.

⚠️ Common exam mistakes

Forgetting that matured deposits of banking companies are excluded from the 7-year IEPF credit rule.
Thinking IEPF only refunds dividend — it also refunds application money, matured deposits, matured debentures (and interest on these).
Believing the IEPF Authority is constituted by SEBI or RBI — it is constituted by the Central Government with the Secretary, MCA as Chairperson.
Forgetting that the CAG (not the C&AG firm or a private auditor) audits IEPF accounts.

Bare-Act text Section 125 · Companies Act, 2013 · click to expand

Investor Education and Protection Fund (IEPF) is established by Central Government. Credit to Fund: Grants by CG; Donations by CG, SG, any company or institution; UDA transferred to IEPF; Amount remaining unclaimed & unpaid for 7 years from date it became due (and interest thereon): Application money due for refund, Matured deposits, Matured debentures; Amount remaining unpaid & unclaimed for 7 years: Sale proceeds of fractional shares, Redemption amount of preference shares, Shares whose dividend is not claimed/paid; Amount of disgorgement; Interest from investments; Sum received by IEPF authority from source decided by CG. Utilization: Refund of unclaimed dividend, matured deposits, matured debentures, application money & interest; Promotion of investors' education; Distribution of disgorged amount; Reimbursement of legal expenses for class action; Other incidental purposes. Authority: Secretary MCA (Chairperson), CEO (Convenor), 6 or 7 members. CAG audits accounts.

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Investor Education and Protection Fund — IEPF (Section 125)

Worked example

⚠️ Common exam mistakes