Transfer of unpaid dividend/payment of unpaid or unclaimed dividend – Procedure evolved by a study undertaken by Ministry of Personnel. - Companies Law - Letter: No. 1‑34011/14/87‑O & M,

Letter: No. 1 ‑ 34011/14/87 ‑ O M, dated 15 ‑ 3 ‑ 1989. Subject:- Transfer of unpaid dividend/payment of unpaid or unclaimed dividend Procedure evolved by a study undertaken by Ministry of Personnel. As you are aware, under section 205A of the Companies Act, 1956, the dividend declared by a company can be claimed by the shareholders from the company itself within a period of three years from the date of declaration of dividend, and the dividend, which remains unpaid/unclaimed within the said period of three years, stands transferred to the General Revenue Account of the Central Government1. Thereafter, the claims are to be made by the shareholders concerned to the Registrar of Companies of the State in which the registered office of the company is situated, in terms of the procedure laid down in the Companies Unpaid Dividend (Transfer to General Revenue Account of the Central Government) Rules, 1978, as amended vide GSR No. 363(E), dated March 22, 1988. At the instance of this Department, a study was undertaken by the Ministry of Personnel, Public Grie-vances and Pensions, Department of Administrative Reforms and Public Grievances, for streamlining the procedure for payment of unpaid/unclaimed dividend to shareholders. The suggestions made in the study report have been considered in the Department. You are requested to advise our constituent member companies to take appropriate action on the following suggestions: (a) Attention is invited to regulation 25 of Table A to the Companies Act, 1956, which provides, inter alia, that on the death of a member, the survivor or survivors where the member was a joint holder, shall be the only persons recognised by the company as having any title of his/their interest in the shares, so that the shares may be transmitted by companies in the name of the surviving member(s) by mere production of a death certificate. The com-panies may be advised to amend their articles of association on the said lines, where necessary. This will help the shareholders to obviate the necessity of obtaining succession certificate, etc. (b) Attention is invited to section 206 of the Companies Act, 1956, which em-powers a shareholder to authorise the company to pay dividend, on his behalf, to any person or to his bankers. The companies may be advised to bring these provisions to the notice of their shareholders so that they could avail of the facility provided under the law. (c) The companies may be advised to record change of address intimated by the shareholders promptly and issue notice of annual general meeting and dividend warrant at the changed address. (d) It is noticed that some companies require endorsement with signatures of the shareholders on the reverse of the dividend warrant before it is presented to the bank. This endorsement appears to be meaningless so long as the dividend warrant is encashable only through the bank under the Account Payee system. In view of this, the companies may be advised to dispense with this requirement. This Department has also taken up the matter separately with the Department of Banking, Ministry of Finance, in this regard. (e) It is noticed that the dividend warrant issued by companies payable within three months. The companies may be advised to extend the currency of the dividend warrant up to six months facilitate the shareholders to encash the same. This Department has also separately taken up the matter with the Department of Banking, Ministry of Finance, in this regard. (f) The companies may be advised to assist their shareholders in preferring claims of unpaid/unclaimed dividend and to display the rules and the formats prescribed therein at their registered offices for information of the share-holders. (g) As per rule 4A of the Companies Unpaid Dividend (Transfer to General Revenue Account of the Central Government) Rules, 1978, the companies are required to inform the shareholders concerned about the particulars of the dividend transferred to the General Revenue Account of the Central Government along with the notice of the annual general meeting. The companies may be advised to strictly follow these provisions of law. (h) As per rule 6(5) of the said Rules, the claimant-shareholder is required to produce an indemnity bond before the Registrar where the amount claimed is more than Rs. 1,000. This limit has now been raised to Rs. 2,500, vide notification GSR No. 136E, dated 1st March, 1989. (i) The Companies may be advised that in case claims for unpaid/unclaimed dividend are made to the company, the shareholders concerned may be informed of the prescribed procedure and necessary assistance rendered.