MCA and SEBI to Simplify Procedures for Unclaimed Shares and Dividends

The Ministry of Corporate Affairs (MCA) and the Securities and Exchange Board of India (SEBI) are collaborating on a streamlined framework to ease the process of reclaiming unclaimed shares and dividends. A task force has been established to assess existing regulations and improve transmission procedures. The group is expected to publish a draft proposal by the first week of September. The revamped framework aims to unify shareholder identification norms and simplify claim formalities.

Current Challenges in Claiming Unclaimed Shares

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

Under current rules, dividends that remain unclaimed for seven consecutive years cause the underlying shares to be categorised as “unclaimed” and transferred to the Investor Education and Protection Fund Authority’s (IEPFA) account. However, inconsistencies in company procedures often complicate claims. Some firms require an affidavit to validate claims, while others do not, creating confusion and delays for shareholders.

Addressing this, Deepti Gaur, Secretary of the MCA, emphasised during a FICCI capital markets conference that the process is unnecessarily burdensome. She highlighted the need to simplify transmission protocols and encouraged companies to carry out outreach efforts to locate shareholders who have lost touch.

A Broader Push for Investor-Friendly Measures

Earlier this year, SEBI introduced Mitra — the Mutual Fund Investment Tracing and Retrieval Assistant — a searchable database aimed at facilitating investors in tracing inactive and unclaimed mutual fund folios. The new framework for unclaimed shares and dividends would complement such investor-centric initiatives.

Once finalised, this framework will help standardise documentation requirements and cut down on procedural hurdles. It is expected to benefit both institutional and retail investors by offering a transparent, uniform, and efficient route to reclaim dormant assets.

How the Streamlined Process Will Work

• Companies and their registrars will follow one harmonised protocol for shareholder identification.
• Documentation requirements, such as affidavits or declarations, will be standardised.
• The revised framework will integrate steps currently handled separately by issuing companies and investors, aiming for clarity.
• Outreach campaigns by companies will improve investor awareness of their entitlements.

Conclusion

The joint initiative by the MCA and SEBI to streamline redemptions of unclaimed shares and dividends represents a significant step toward investor-friendly reforms. By harmonising validation processes and reducing bureaucratic complexity, the new framework could greatly enhance access and efficiency in reclaiming dormant assets. The anticipated draft proposal, expected in early September, is a key milestone in this reform journey.