Unclaimed Dividend

Unclaimed dividends are those not yet claimed by shareholders and are a liability for the company.
Unclaimed Dividend
3 min
03-July-2024

Whenever a company declares profits, it may distribute the dividends amongst its shareholders. An unclaimed dividend is one that, although paid by a company, has not yet been taken or claimed by the shareholder. The company is liable to pay the unclaimed dividend as and when demanded by the shareholder.

However, unclaimed dividends come with a time limit. If the dividend stays unclaimed for more than 7 years, the company has the right to transfer the dividend to the Investor Education and Protection Fund Authority (IEPF), which falls under the Ministry of Corporate Affairs.

Unclaimed dividends are sums of money owed to shareholders that have not been claimed for various reasons, such as outdated contact information or neglect. In this article, we will dive into what unclaimed dividends are, provide examples to illustrate the concept, and guide you through the process of checking for and reclaiming these dividends. We'll also explore the implications of unclaimed dividends for both companies and shareholders, and discuss the steps companies take to manage and distribute these funds. By the end of this article, you'll have a comprehensive understanding of how unclaimed dividends work and how you can ensure you're not missing out on potential earnings.

What is an unclaimed dividend?

An unclaimed dividend is money that a company owes a shareholder, but the shareholder has not claimed it for various reasons. A dividend generally becomes unclaimed 30 days after it has been declared.

There can be various reasons why dividends remain unclaimed. Some of these include:

  • The registered address of the shareholder has changed and has not been updated.
  • Bank account details to which the dividend has to be sent have been changed or not updated.
  • Death of the primary holder without any details of nominees or inheritors.
  • Some shareholders are unaware that the dividend was declared, while others may forget to claim.

Example of unclaimed dividend

Consider a scenario where a shareholder of company ‘X’, Mr. A, has not claimed his dividends declared for the last several years. Notifications were sent to Mr. A via mail, but they could not reach him due to an outdated address. These dividends kept accumulating over the years and remained uncollected in the company’s financial records.

The above is a fairly common scenario of unclaimed dividends, especially for large corporations with crores lying in unclaimed dividends. This is because they usually have many shareholders who might simply not be reachable due to changes in the last known contact information.

Also read: What are dividend yield funds?

How do you check for unclaimed dividends?

Here is a step-by-step guide to check if you have any outstanding dividends left to be claimed:

Step 1: You can directly visit the website of the company whose dividends you think have not been claimed by you. An alternative is to visit the Investor Education and Protection Fund (IEPF) website—a government initiative to protect investor interests.

Step 2: On the company website, go to the investor relations tab or shareholder services section that will give you the information regarding dividend details. Alternatively, on the IEPF website, you can enter the Client ID/Account Number to view unclaimed dividends.

Step 3: Under the investor relations tab or shareholder services section, you will find a section for unclaimed dividends dedicated to dividends declared but not claimed. On the IEPF website, select the name of the entry that matches your details.

Step 4: On clicking ‘Unclaimed Dividends’, you will be prompted to enter specific details like your name, Permanent Account Number (PAN), or your folio number to access the result. While on the IEPF website, you can click the box in the S. No. column and then hit ‘Submit’.

Step 5: On entering the details on the company website, a list will appear that will display if there are any unclaimed dividends with the individual’s account. On the IEPF website, you can browse and see the unpaid share dividends for your account.

Unclaimed dividend treatment

Unclaimed dividends that are not claimed within seven years are mandatorily transferred to the Investor Education and Protection Fund (IEPF).

Let us understand this with the help of an example.

A company declared dividends for a shareholder, Mr. A, in 2016. Mr. A did not claim these dividends for seven years until 2023. Hence, the unclaimed dividends will now be transferred to IEPF. However, this does not mean that Mr. A is not eligible to claim his dividends or will have to forfeit his dividend rights.

The shareholder will not have to claim his dividends from the IEPF after following a long-drawn process—the exact details of which we will cover in our next section.

Broadly speaking, it would require preparing a claim application and meeting all necessary legal requirements and documentation.

With this treatment of unclaimed dividends, the funds of the shareholder remain safe and can be claimed by the rightful owner even after several years from the declaration.

Also read: What is IDCW in mutual funds

How to claim unclaimed dividends?

Step 1: Visit the IEPF website

On the homepage, go to the ‘Services’ tab, where you will find the ‘Claim Refund’ option. After clicking, you will be redirected to the ‘Upload eForms’ page.

Step 2: Log in to the MCA Portal

Upon clicking ‘Upload eForms’, the browser will redirect you to the MCA portal and ask you to log in. Once you are logged in successfully, go to the ‘MCA Services’ tab and click the ‘IEPF-5’ option.

Step 3: Fill out the online form

To fill out the refund claim form on the website, you will be required to enter all your details, such as name, folio number, cancelled cheque, PAN number, demat account number, etc., to verify your identity and establish your right to your investment in the company.

Step 4: Attach the required documents

Attach the necessary documents, such as your PAN card, cancelled cheque, ID proof, and other documents that establish your entitlement to the investment in the company. Make sure all details entered are correct to avoid any delays in processing.

Step 5: Submission of the form

Upon submitting the form through the portal, an SRN acknowledgement will be assigned to you to help you track your claim status.

Step 6: Share physical documents with the nodal officer

You must submit physical copies of your documents to a nodal officer designated by the company. Upon accessing your documents, the nodal officer will send an e-Verification Report to the authorities of IEPF.

Step 7: The company files a verification report

In this step, the company's nodal officer will review all the physical documentation you have submitted online. Once complete, an online e-Verification Report will be delivered with approval to the respective authorities of the IEPF.

Step 8: IEPF authority approval

The verification from IEPF can take some time, so you might need to follow up, with 60 days being the maximum time frame. You might also be required to produce additional documents if deemed necessary. Upon successful verification, an approval email will be sent to you on your registered email.

Step 9: Initiation of refund and transfer of money

On successful claim verification, the IEPF authority will start the refund process. The unclaimed dividend amount will be transferred to your bank account.

Also read: What is mutual fund yield?

Conclusion

Getting hold of your unclaimed dividends can boost your financial health. Recovering assets you would otherwise have lost or forgotten about is always rewarding. Investors should be proactive and not shy away from taking the necessary steps to reclaim their unclaimed dividends.

If you want to ensure transparency and efficiency in your investment journey, you can invest in mutual funds through the Bajaj Finserv Mutual Fund Platform. You can browse over 1,000 mutual fund schemes and compare mutual funds to find the ones that align with your risk tolerance. You can then make a lumpsum investment or SIP investment to realise your financial goals.

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Frequently asked questions

How do I find my unclaimed dividends?

To find your unclaimed dividends, check your shareholder statements, contact the company's investor relations or registrar, or use the national depository or government websites that track unclaimed financial assets.

How do I redeem unclaimed dividends?

To redeem unclaimed dividends, contact the company's registrar or follow the specific procedures on the investor relations website, which typically involve submitting a claim form along with necessary identification and proof of ownership documents.

What is unclaimed dividend example?

An example of an unclaimed dividend could be when a shareholder does not cash or deposit a dividend check, leading to the funds remaining with the company as unclaimed.

What causes unclaimed dividends?

Unclaimed dividends often occur due to shareholders not updating their contact details, overlooking notifications, or not being aware of the dividend payments.

What is another name for unclaimed dividend?

Another name for unclaimed dividends is "outstanding dividends."

How many years can you claim unclaimed dividends?

You can claim unclaimed dividends for up to seven years, after which they are transferred to the Investor Education and Protection Fund (IEPF).

What is the time limit for unclaimed dividends?

The time limit for unclaimed dividends is seven years, after which they are transferred to the Investor Education and Protection Fund (IEPF).

Are unclaimed dividends taxable?

Yes, unclaimed dividends are taxable. They are considered income when they are originally declared and payable, and they must be reported in your tax return for that fiscal year, regardless of whether they are actually claimed or not.

How do I know if I have unclaimed dividends?

You can check for unclaimed dividends on the Investor Education and Protection Fund (IEPF) website or contact the company’s registrar and transfer agent to inquire about any unclaimed amounts.

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Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.