Navigating the Bureaucratic Labyrinth of Unclaimed Shares in India
A Grueling Journey
For Ashita Awasthy, reclaiming her father’s long-forgotten shares has been an arduous journey marked by significant delays and bureaucratic hurdles. The shares, purchased in the 1990s and discovered in 2015, have faced numerous obstacles en route to recovery. Held in her name and her mother’s, these shares have languished for decades due to inefficiencies within the Investor Education and Protection Fund (IEPF), ensnaring unsuspecting investors in its labyrinthine process.
“Document preparation aside, the way companies and IEPF take all the time in the world with their archaic processes and speed post communication is disturbing. My 83-year-old mother had to sign hundreds of physical documents,” says Ghaziabad-based Awasthy, who is still waiting for the transfer of a few remaining dividends, with only a couple of shares left to be transmitted.
Common Obstacles
Awasthy’s story is not unique. Many Indians find themselves entangled in the complex recovery process of unclaimed shares—a financial reservoir often forgotten. This process is frequently marred by excessive paperwork, prolonged delays, and bureaucratic indifference.
Issues with the IEPF Authority
The Investor Education and Protection Fund Authority (IEPFA), the government body responsible for managing unclaimed shares, has faced significant criticism for its sluggish procedures and lack of transparency. Although recent reforms aim to streamline the process, many investors continue to face significant challenges.
An IEPF official, speaking anonymously, mentioned a delay in the launch of an anticipated integrated portal intended to digitize the claims process. Originally scheduled for February 2024, the launch has been postponed by six months. “Once it goes live, a lot of the manual work we currently do will be digitized, significantly reducing the time required to approve claims,” the official added.
The Bureaucratic Maze
The process begins with a regulation that if shareholders do not claim dividends for seven consecutive years, the company transfers both dividends and shares to the IEPF. What should be a straightforward recovery process has become cumbersome due to outdated procedures and excessive red tape. The IEPF requires extensive documentation—including death certificates, succession certificates, and indemnity bonds—before processing claims.
Expert Opinions
Pieyusha Sharma, Operations Manager at Wealth Finder, highlighted a Securities and Exchange Board of India (SEBI) directive in this context. According to SEBI guidelines, companies and RTAs should consolidate all observations and communicate them to shareholders in one go to avoid unnecessary delays. However, there should be stricter enforcement of this rule.
Sharma suggests that the timeline to respond to filed claims should be strictly adhered to and a real-time tracking mechanism should be in place. Shareholders must be given a chance to rectify errors before their claims are rejected.
Personal Experiences
Ashita Awasthy initially found the process of claiming shares too complex. “Each time I sent the necessary documents, it took 2-3 months to receive a response despite multiple follow-ups,” says Awasthy. A relative recommended she seek advice from Wealth Finder, under whose guidance she submitted all required documents, overcoming delays caused by incomplete documentation.
Recent Amendments and Improvements
The IEPFA recently introduced amendments to its rules, aligning them with SEBI circulars. However, it has yet to act on several key proposals it sought feedback on in March 2024. Proposals included setting a strict timeline for processing claims and delegating the transfer of shares to companies.
Endless Waits: A Common Story
Senior citizens experience significant disheartening delays. For instance, an 85-year-old man approached Khagesh Chitlangiya, Founder of Jeevantika Consultancy Services, only to be told that the process would take 3-4 years. Most IEPF cases involve senior citizens.
Addressing Procedural Challenges
The IEPFA has undertaken measures to streamline processes. Key amendments now simplify share transmission procedures by eliminating the need for succession certificates or court orders under certain conditions.
Key Simplifications
- Legal heir certificates, along with indemnity bonds and no-objection certificates (NOC) from other legal heirs, suffice for transmission of shares.
- For shares valued below ₹5 lakh in physical form and ₹15 lakh in demat form, the legal heir certificate requirement is waived.
- FIRs are no longer required for lost shares below ₹5 lakh, and a single newspaper advertisement suffices for shares above ₹5 lakh.
Reliefs and Amendments
- Elimination of the surety affidavit requirement for lost shares.
- Companies must obtain special contingency insurance policies to protect nodal officers from errors.
A Glimmer of Hope
To address shareholder grievances, the IEPF Authority holds ‘Niveshak Sewak’ sessions every Monday at its Delhi office and occasionally in other cities. Additionally, the IEPFA has updated its toll-free number to 14453 and requires grievances to be submitted through an upgraded grievance ticketing system on its website.
The Road Ahead: A Call for Formalization
A lack of awareness remains a significant challenge. Third-party companies help many discover unclaimed assets, but their reliability varies. Industry stakeholders suggest creating a formal ecosystem where specific firms are recognized by the IEPF to assist with share recovery, setting standardized fees and reducing systemic burden.
As the system continues to evolve, shareholders like Awasthy and countless others await tangible changes that promise to streamline the complex process of reclaiming valuable financial assets.
Key Takeaways
- Excessive Bureaucracy: The process of reclaiming unclaimed shares is plagued by excessive documentation and outdated procedures.
- Delayed Processes: Significant delays in processing claims, especially affecting senior citizens.
- Recent Amendments: New rules simplify some processes but gaps remain.
- Need for Formalization: Industry suggestions advocate for a formalized ecosystem to assist with share recovery.
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