Unclaimed Shares
Unclaimed shares are shares whose dividends have remained unpaid or unclaimed for seven consecutive years, resulting in mandatory transfer of both the unpaid dividends and the underlying shares to the Investor Education and Protection Fund (IEPF) under the Companies Act, 2013.
The concept of unclaimed shares is directly linked to the Investor Education and Protection Fund (IEPF), which was significantly strengthened under the Companies Act, 2013. When a shareholder fails to claim dividends declared by a company for seven consecutive years from the date of transfer to the unpaid dividend account, the company is required to transfer both the unclaimed dividends and the corresponding shares to the IEPF Authority under Section 124 and 125 of the Companies Act.
This mechanism was introduced to address the large pool of inactive shareholder accounts — estimated at millions across Indian listed companies — where heirs and nominees were unaware of or unable to claim their inheritance. By transferring shares to IEPF, the government acts as a custodian and creates a formal recovery process.
The recovery of shares and dividends from IEPF is governed by the IEPF (Accounting, Audit, Transfer and Refund) Rules, 2016. The legal heir, nominee, or the original shareholder themselves (if they are alive and had simply forgotten) can file an application with the IEPF Authority through Form IEPF-5 on the MCA portal. The application must be accompanied by supporting documents including proof of identity, proof of entitlement (such as a succession certificate, will, or notarised letter of administration), and bank account details.
The IEPF Authority verifies the claim and, upon satisfaction, instructs the company's nodal officer to release the shares back to the claimant's demat account and the unclaimed dividends to their bank account. The process, while straightforward in principle, can be time-consuming in practice, taking several months.
Companies are required to publish the names of shareholders whose shares have been transferred or are due to be transferred to IEPF on their websites and in their annual reports, helping investors and their families identify potential claims.