# Unpaid Dividend Account — Section 124

## Core Idea

If a shareholder does not encash the dividend within the 30-day window, the company cannot keep the money in its own current account. It must park the money in a dedicated 'Unpaid Dividend Account' so that the shareholder can claim it later, and ultimately, if still unclaimed, the money goes to the Investor Education and Protection Fund (IEPF).

## Step-by-Step Procedure

### Step 1 — Transfer to Unpaid Dividend Account

Where dividend declared has not been paid/claimed within 30 days of declaration, the company shall transfer the unpaid/unclaimed amount to a special account called the "Unpaid Dividend Account" opened in a scheduled bank.
Time limit for transfer: within 7 days from the expiry of the 30-day payment period.

### Step 2 — Statement on Website

Within 90 days of transfer to Unpaid Dividend Account, company shall prepare a statement containing names, last known addresses, and unpaid dividend amounts of shareholders entitled to the unpaid dividend.
This statement must be placed on the company's website (and on any other website specified by the Central Government).

### Step 3 — Default in Transfer → Interest @ 12% p.a.

If the company fails to transfer to the Unpaid Dividend Account within 7 days, it shall pay interest @ 12% p.a. from the date of default.
Such interest accrues for the benefit of the shareholders to whom dividend is unpaid (not for the company).

### Step 4 — Claim by Shareholder

Any shareholder claiming unpaid dividend may apply to the company for payment of the claimed amount. The company must pay from the Unpaid Dividend Account.

### Step 5 — Transfer to IEPF after 7 Years

Amounts remaining unpaid/unclaimed in the Unpaid Dividend Account for 7 years from the date of such transfer shall be transferred by the company to the Investor Education and Protection Fund (IEPF).
Along with the amount, a statement of details is to be furnished to the IEPF authority.
Shares in respect of which dividend has not been paid/claimed for 7 consecutive years or more shall also be transferred to IEPF (in the name of the IEPF account).

### Step 6 — Recovery from IEPF

The shareholder is not lost forever — he/she can claim the shares and the unpaid dividend from IEPF by following the prescribed procedure.

## Timeline Snapshot

```

Day 0 : Dividend declared

Day 5 : Deposit declared amount in separate bank account (S.123(4))

Day 30 : Last day for paying dividend (S.127)

Day 37 : Last day to transfer unpaid amount to Unpaid Dividend Account

Day 127 : Last day to upload statement on website (90 days from transfer)

Year 7 : Unclaimed amount + corresponding shares → transferred to IEPF

```

## Punishment for Contravention (S.124(7))

Company: penalty per provisions of the section.
Every officer in default: penalty (with daily fine for continuing default — refer current text of the section).

## Linkage with Other Sections

Section 123 → declaration & sources of dividend.
Section 127 → punishment for not paying within 30 days.
Section 124 → handling the residue that no one has claimed.

Worked example

### Example 1

Example 1 — Transfer to Unpaid Dividend Account. ABC Ltd. declares dividend on 1 August 2026. 30 days expires on 31 August 2026. Of the total dividend, ₹5 lakh remains unpaid/unclaimed. ABC Ltd. must transfer this ₹5 lakh to its Unpaid Dividend Account by 7 September 2026 (7 days from expiry).

### Example 2

Example 2 — Default in transfer. If ABC Ltd. transfers the amount only on 30 September 2026, it must pay interest at 12% p.a. from 8 September 2026 (date of default) till 30 September 2026 — for the benefit of the unpaid shareholders.

### Example 3

Example 3 — Transfer to IEPF. Amount transferred to Unpaid Dividend Account on 7 September 2026 and still unclaimed on 7 September 2033 (7 years later) must be transferred to IEPF. If the related shareholder has not claimed dividend for 7 consecutive years, the corresponding shares are also transferred to IEPF.

### Example 4

Example 4 — Claim from IEPF. A shareholder who discovers in 2034 that her dividends and shares have been transferred to IEPF can apply to IEPF authority in the prescribed manner and recover both the unpaid dividend and the shares.

⚠️ Common exam mistakes

Confusing the deposit under Section 123(4) (separate bank account within 5 days of declaration) with the transfer to Unpaid Dividend Account under Section 124 (7 days after expiry of 30-day payment window).
Thinking the interest rate for default in transfer is 18% (that is the rate under S.127 for non-payment to shareholder) — under S.124(3) the rate is 12% p.a.
Assuming the interest on default accrues to the company — it accrues to the shareholders.
Missing that not only the dividend but also the shares are transferred to IEPF if dividend is unclaimed for 7 consecutive years.
Believing the 7 years runs from the date of declaration — it runs from the date of transfer to the Unpaid Dividend Account.
Forgetting the requirement to upload the statement of unpaid dividend on the company's website within 90 days of transfer.

Bare-Act text Section 124 · Companies Act, 2013 · click to expand

Section 124(1): Where a dividend has been declared by a company but has not been paid or claimed within thirty days from the date of the declaration to any shareholder entitled to the payment of the dividend, the company shall, within seven days from the date of expiry of the said period of thirty days, transfer the total amount of dividend which remains unpaid or unclaimed to a special account to be opened by the company in that behalf in any scheduled bank to be called the Unpaid Dividend Account. Section 124(2): The company shall, within a period of ninety days of making any transfer of an amount under sub-section (1) to the Unpaid Dividend Account, prepare a statement containing the names, their last known addresses and the unpaid dividend to be paid to each person and place it on the website of the company... Section 124(3): If any default is made in transferring the total amount referred to in sub-section (1) or any part thereof to the Unpaid Dividend Account of the company, it shall pay, from the date of such default, interest on so much of the amount as has not been transferred to the said account, at the rate of twelve per cent. per annum and the interest accruing on such amount shall ensure to the benefit of the members of the company in proportion to the amount remaining unpaid to them. 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... Section 124(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...

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Unpaid Dividend Account & Transfer to IEPF (Section 124)

Worked example

⚠️ Common exam mistakes