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

The IEPF is a Central Government fund created to protect investor interests and use unclaimed amounts for investor education and refund.

### Amounts Credited to IEPF

1. Amount under Section 205A of the Companies Act, 1956 (legacy unpaid dividends).

2. Unpaid Dividend transferred under Section 124(5) (after 7 years in Unpaid Dividend A/c).

3. Application money received by companies and due for refund.

4. Matured deposits / matured debentures lying unclaimed.

5. Interest income accrued on the above.

6. Donations by Central Government, State Government, companies or any other institution.

7. Sale proceeds of fractional shares arising out of bonus shares, mergers, etc.

8. Redemption amount of preference shares remaining unpaid/unclaimed for 7 years.

9. Other amount as may be prescribed.

### Utilisation of IEPF

The Fund shall be utilised for:

Refund of unclaimed dividends, matured deposits, matured debentures, application money, and interest thereon.
Promotion of investor education, awareness and protection.
Distribution of disgorged amounts to eligible/identifiable applicants (e.g., investors who suffered loss due to fraudulent or wrongful actions).
Reimbursement of legal expenses incurred in pursuing class action suits sanctioned by NCLT.
Any other purpose incidental to the above.

### Claim from IEPF

Any claimant of shares transferred under Sec. 124(6) or dividend transferred under Sec. 124(5) may apply to the IEPF Authority for refund.
Application is made through the IEPF Authority.

### IEPF Authority

IEPF is administered by an Authority constituted by Central Government.
Consists of a Chairperson, Chief Executive Officer (CEO), and other members – with ex-officio members not exceeding 7 and other members not exceeding 7.

### Role of IEPF Authority

Maintain separate accounts and other records of the Fund.
Spend the money of the Fund for carrying out its objects.
Authority shall prepare annual report giving details of activities financed and audited by the Comptroller & Auditor General (CAG) of India.
The audited accounts and audit report shall be forwarded to Central Government, which shall lay them before each House of Parliament.

Worked example

### Example 1

Example: Mr. X did not claim his dividend declared by ABC Ltd. in 2019. The amount was transferred to the Unpaid Dividend A/c on 7 February 2019 and remained unclaimed for 7 years. In 2026, the amount and shares were transferred to IEPF. Can Mr. X still recover his money?

Solution: Yes. Mr. X (the claimant) may apply to the IEPF Authority for refund of both the unpaid dividend amount and the shares. The transfer to IEPF does not extinguish his right; it merely shifts the custodian from the company to the IEPF Authority.

### Example 2

Example – Source of Funds: Identify which of the following will go to IEPF: (a) Dividend declared 31 days back but not paid, (b) Matured fixed deposit of a company unclaimed for 7 years, (c) Share application money refundable for 2 years, (d) Donation by government.

Solution: (b) and (d) directly credit to IEPF. (a) goes first to Unpaid Dividend A/c and only after 7 years to IEPF. (c) application money for refund goes to IEPF only after the prescribed unclaimed period.

⚠️ Common exam mistakes

Believing that once amounts are transferred to IEPF, the investor permanently loses the right to claim — actually, the investor can always apply to the IEPF Authority for refund.
Forgetting that 'donations' also feed IEPF, not just unclaimed shareholder amounts.
Confusing IEPF (under Sec. 125 of 2013 Act) with the older 'IEPF' under Sec. 205C of the 1956 Act.
Missing that reimbursement of legal expenses in class action suits is one of the permitted uses of IEPF.

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

The Central Government shall establish a Fund to be called the Investor Education and Protection Fund. There shall be credited to the Fund — (a) the amount given by the Central Government by way of grants; (b) donations given to the Fund; (c) the amount in the Unpaid Dividend Account of companies transferred to the Fund under sub-section (5) of section 124; (d) the amount in the general revenue account which had been transferred to that account under sub-section (5) of section 205A of the Companies Act, 1956; (e) the amount lying in the Investor Education and Protection Fund under section 205C of the 1956 Act; (f) the interest or other income received out of investments made from the Fund; (g) the amount received under sub-section (4) of section 38; (h) application money received by companies for allotment of securities and due for refund; (i) matured deposits with companies other than banking companies; (j) matured debentures; (k) interest accrued on the amounts referred to in (h) to (j); (l) sale proceeds of fractional shares arising out of issuance of bonus shares, merger and amalgamation for seven or more years; (m) redemption amount of preference shares remaining unpaid or unclaimed for seven or more years; (n) such other amount as may be prescribed.

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Investor Education and Protection Fund (Section 125)

Worked example

⚠️ Common exam mistakes