Transfer of Unpaid Dividend and Shares to IEPF [Sec 124(5)-(7)]
# Transfer of Unpaid Dividend and Shares to IEPF
## 1. Transfer of Money to IEPF — Sec 124(5)
Any money lying in the Unpaid Dividend Account which remains unpaid or unclaimed for 7 years from the date of transfer to UDA,
Shall be transferred by the company, along with interest accrued (if any),
To the Investor Education and Protection Fund (IEPF).
## 2. Transfer of Shares to IEPF — Sec 124(6)
All shares in respect of which dividend has not been paid or claimed for 7 consecutive years or more,
Shall be transferred by the company to the IEPF,
In the name of the Fund,
Along with a statement containing prescribed details.
### Exception
If any dividend has been paid or claimed during those 7 years, the shares shall NOT be transferred to IEPF.
### Procedure
The company shall file a statement with the IEPF Authority detailing the transfer.
The IEPF Authority issues a receipt as evidence of the transfer.
## 3. Right to Reclaim — Sec 124(6) proviso
The claimant of shares (or dividends) transferred to IEPF can reclaim them from IEPF by:
Following the prescribed procedure, and
Submitting the required documents to establish entitlement.
## 4. Punishment for Contravention — Sec 124(7)
Party
Penalty
Company
₹1,00,000 + ₹500/day of continuing failure, max ₹10,00,000
Every officer in default
₹25,000 + ₹100/day of continuing failure, max ₹2,00,000
## Logic
7-year inertia threshold — if a shareholder has not claimed dividend for 7 straight years, it is presumed the shares are 'lost' or the holder is untraceable. Transferring them to IEPF prevents the company from holding cash and shares forever in limbo.
Reclaim right preserves shareholder ownership — the transfer is custodial, not confiscatory. Genuine claimants can always recover.
The 'any dividend paid/claimed' carve-out — protects active shareholders who choose not to encash one particular dividend; only true 'lost' holdings get transferred.
## Key Takeaway
7 years of total inactivity triggers transfer of both money and shares to IEPF. But any one dividend paid/claimed in that window saves the shares (though the unpaid amount itself may still get transferred after 7 years from UDA).
Worked example
### Example 1
Example 1 (Money transfer): ABC Ltd. transferred unpaid dividend of ₹2 lakh to UDA on 5-Oct-2018. As on 5-Oct-2025, it remains unclaimed. The company must transfer ₹2 lakh (plus any interest) to IEPF.
### Example 2
Example 2 (Shares with carve-out): Mr. P holds 500 shares in XYZ Ltd. Dividend has been unclaimed for FY 2017-18, 2018-19, 2019-20, but he claimed the FY 2020-21 dividend. The 7-year continuous test breaks — his shares are not transferred to IEPF. (Only the very old unpaid amounts in UDA may still be transferred after their respective 7-year periods.)
### Example 3
Example 3 (Reclaim): Ms. Q discovers that her shares were transferred to IEPF in 2024. She files an application with the IEPF Authority along with prescribed documents (share certificate copy, KYC, indemnity, etc.). On verification, the shares and accrued dividend are transferred back to her demat account.
⚠️ Common exam mistakes
Counting 7 years from the dividend declaration date instead of from the date of transfer to UDA for the money transfer.
Believing shares are forfeited or extinguished on transfer to IEPF — they remain reclaimable indefinitely.
Forgetting the 'any dividend paid/claimed in 7 years saves the shares' carve-out.
Stating the maximum company penalty as ₹5 lakh — it is ₹10 lakh under Sec 124(7).
Confusing officer penalty maximum (₹2 lakh) with company penalty maximum (₹10 lakh).
Bare-Act text Section 124(5), (6) and (7) · Companies Act, 2013 · click to expand
Section 124(5): Any money transferred to the Unpaid Dividend Account of a company in pursuance of this section which remains unpaid or unclaimed for a period of seven years from the date of such transfer shall be transferred by the company along with interest accrued, if any, thereon to the Fund established under sub-section (1) of section 125 and the company shall send a statement in the prescribed form of the details of such transfer to the authority which administers the said Fund and that authority shall issue a receipt to the company as evidence of such transfer. (6) All shares in respect of which dividend has not been paid or claimed for seven consecutive years or more shall be transferred by the company in the name of Investor Education and Protection Fund along with a statement containing such details as may be prescribed: Provided that any claimant of shares transferred above shall be entitled to claim the transfer of shares from Investor Education and Protection Fund in accordance with such procedure and on submission of such documents as may be prescribed. (7) If a company fails to comply with any of the requirements of this section, such company shall be liable to a penalty of one lakh rupees and in case of continuing failure, with a further penalty of five hundred rupees for each day after the first during which such failure continues, subject to a maximum of ten lakh rupees and every officer of the company who is in default shall be liable to a penalty of twenty-five thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees.