Recovery of Lost Shares of TCS from IEPF Can Make You a Multimillionaire!
How would you feel if you find ₹ 1,000 in your jeans that you forgot about? Happy, right?
Now imagine if you find 1,000 shares of TCS bought during its IPO. Congratulations! You have hit a jackpot of 1 Crore Rupees.
How Did This Happen?
Tata Consultancy Service Ltd. (“TCS”) is India’s No. 1 multinational company specializing in Information Technology (“IT”) and Consultancy Services. It has expanded manifolds since its establishment. In April 2018, it became the first IT company to cross the milestone of $100 Billion in terms of market capitalization. TCS became the second Indian company to reach this milestone after Reliance Industries Ltd. (“RIL”). TCS has been consistent in its over-arching performance. Even in the times of Covid-19, it did not fail to impress with its numbers. In March 2020, TCS, again became the most valued Indian firm with the market capitalization of ₹ 6,82,408.68 crores, beating RIL by ₹ 6,959.73 crores. In September this year, it became the first IT company and the second Indian company after Reliance Industries Limited to reach the milestone of ₹ 9 trillion in terms of market capitalization. In October, it became the world’s most valuable IT company surpassing Accenture.
When everyone was recovering from the setback of COVID-19 pandemic, it continued to generate profit and dividends for its investors. For the first two quarters of the year 2020-21, the shares of TCS provided an aggregated dividend of ₹17 per share to its shareholders. So, if you or your deceased relative had bought 1,000 shares in 2004, i.e., during its IPO, then you could have received a dividend of ₹ 68,000 in the first two quarters of this year alone.
Now, you must be wondering, that how come a dividend of ₹ 17 per share for 1,000 shares yielded an income of ₹ 68,000. It should have yielded an income of only ₹ 17,000. The following calculation will clear your confusion and help you to understand how the 1,000 shares bought in 2004 are worth more than ₹ 1Crore today.
Calculation
- Suppose you bought 1,000 shares of TCS in 2004.
- On 28th July 2006, the company issued bonus shares in the ratio of 1:1.
[Bonus Shares are the shares issued by the company to its shareholders as fully paid up shares without any cost. In simpler words, these shares are a gift from the company to its shareholders].
Issuing bonus shares at a 1:1 ratio means, that for every share owned by a shareholder, the company will issue another share in his name. This means that if you had 1,000 shares, it has now become 2,000 shares.
- On 16th June 2009, the company again issued the bonus shares in the ratio of 1:1. This means that your 2,000 shares have become 4,000 shares.
- Since,
Dividend Received x No. of Shares = Total Dividend
Therefore,
₹ 17 x 4,000 shares = ₹ 68,000
- Now, the price of 1 TCS share, as of 17th November 2020, is ₹ 2,673. Thus, the value of your shares as of date is,
₹ 2,673 x 4,000 shares = ₹ 1,06,92,000 (One Crore Six Lakhs Ninety-Two Thousand)
- The above amount is only the price of the shares. We have not calculated the dividends that you have received so far.
- TCS is known for paying its investors handsomely. Till date, the company has paid an aggregate dividend of ₹ 518.5 per share.
Source: https://www.tcs.com/dividend-payment-details
Now you can calculate your dividends accordingly.
So, if you had invested in 1,000 shares of TCS in 2004, then you would have become a Crorepati today. Now the real issue is, you know that you are the rightful owner of the TCS shares, but you are not in the possession of the same because they are held by the Government of India. This happens because of the Government’s rule that if a dividend remains unclaimed for seven years or more, then it has to be transferred to the Investor Education and Protection Fund (“IEPF”). The government introduced the concept of IEPF in 2016 to address the issue of such ‘forgotten shares’.
Investor Education and Protection Fund
You might find it hard to believe but it is very common for people to forget about their shareholdings in companies. There could be many reasons for the same, such as:
- Sometimes, an individual invests a very small amount in a company and forgets about it.
- Sometimes, people buy shares in a company without assigning a nominee. When they die, the shares remain unclaimed as the heirs of the deceased do not even know about the existence of such shares.
- Sometimes, the heirs of the deceased person do know about the shares. But due to a family dispute regarding the share in the property, the company’s shares become part of the dispute, and hence, remain unclaimed.
There could also be some other reasons that could lead to investors forgetting about them. Due to this, in almost every company they have these dormant shares without anyone showing ownership.
Earlier, the companies were obligated to transfer such unclaimed dividends to the government funds. The government would use such funds under various public policies for welfare schemes and developmental works. However, when the government saw that later, people are coming to claim their dividends, it decided to set up IEPF. It acts as a platform, where people can approach and claim their shares in various companies by filing an application. It acts as a one-stop solution, as people do not have to go to different companies one by one to claim their shares and dividends earned on the said shares. In order to claim the recovery of shares and to claim the refund of the unclaimed dividends from the IEPF, an individual has to apply for the same to the managing authority of the fund manager.
Provisions Governing IEPF
IEPF is governed by the Companies Act, 2013 and Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016. Under these laws, once a company declares the dividend, then it has to be claimed by the shareholder within 30 days of such declaration. If the dividend remains unclaimed, then the company shall transfer such unclaimed dividend to a special account, opened by the company, called ‘Unpaid Dividend Account’.
After transferring the amount to the ‘Unpaid Dividend Account’, the company, within 90 days, has to publish a list of all the shareholders along with their unclaimed dividend on their website. After that, if a person wants to claim the dividend, then he has to apply to the company for the payment of the unclaimed dividend.
If a person fails to claim the dividend for a consecutive period of 7 years, then the company is obliged to transfer the unclaimed dividend to the IEPF. Along with the amount, the company is also obliged to transfer such shares in the name of the IEPF.
Note: The shares transferred in the name of the IEPF are the shares on which the dividend has been declared by the company, but the shareholder has failed to claim the same for a consecutive period of 7 years.
Unclaimed Dividend & Unclaimed Shares of TCS
From the Annual Reports of a company, we can see the transfer status of the unclaimed dividend and unclaimed shares to the IEPF.
Funds & Shares transferred to the IEPF
According to the Annual Report 2019-2020 of the company, TCS has transferred the following unpaid dividend and unclaimed shares to the IEPF during the Financial Year of 2020:
| Financial Year | Amount of Unclaimed Dividend | Number of Unclaimed Shares |
|---|---|---|
| 2011-2012 | 1,73,50,000 | 35,251 |
| 2012-2013 | 73,20,000 | 19,535 |
| Total | 2,46,70,000 | 54,786 |
The company in the previous financial year has transferred Two Crores Forty-Six Lakhs Seventy Thousand Rupees (₹ 2,46,70,000/-) of the unclaimed dividend, along with Fifty-Four Thousand Seven Hundred Eighty-Six (54,786) shares in the IEPF. From the above table, it can be deduced that the company has a huge chunk of unclaimed dividends and unclaimed shares in the IEPF. The shareholders must look into their investment history to look for such unclaimed shares and claim their dividends from IEPF.
Funds & Shares to be transferred to the IEPF
The Annual Report 2019-2020 also provides the outstanding unclaimed dividend and the dates by which an investor can approach the Company’s Registrar or the Transfer Agent to claim the funds. After the expiry of the stated dates, TCS will be forced to transfer such dividends, along with the shares, to the IEPF.
The following tables provide the information regarding the date of declaration of dividends and the last date by which the shareholders can claim the dividends.
- For shareholders of Tata Consultancy Service Limited (TCS):
| Financial Year | Date of Declaration | Last Date of Claiming Unpaid Dividend |
|---|---|---|
| 2012-2013 | June 28, 2013 | July 28, 2020 |
| 2013-2014 | July 18, 2013 | August 18, 2020 |
| October 15, 2013 | November 14, 2020 | |
| January 16, 2014 | February 16, 2021 | |
| June 27, 2014 | July 27, 2021 | |
| 2014-2015 | July 17, 2014 | August 18, 2021 |
| October 16, 2014 | November 16, 2021 | |
| January 15, 2015 | February 15, 2022 | |
| June 30, 2015 | July 30, 2022 | |
| 2015-2016 | July 9, 2015 | August 9, 2022 |
| October 13, 2015 | November 12, 2022 | |
| January 12, 2016 | February 11, 2023 | |
| June 17, 2016 | July 17, 2023 | |
| 2016-2017 | July 14, 2016 | August 15, 2023 |
| October 13, 2016 | November 16, 2023 | |
| January 12, 2017 | February 12, 2024 | |
| June 16, 2017 | July 16, 2024 | |
| 2017-2018 | July 13, 2017 | August 13, 2024 |
| October 12, 2017 | November 12, 2024 | |
| January 11, 2018 | February 10, 2025 | |
| June 15, 2018 | July 15, 2025 | |
| 2018-2019 | July 10, 2018 | August 9, 2025 |
| October 11, 2018 | November 10, 2025 | |
| January 10, 2019 | February 9, 2026 | |
| June 17, 2019 | July 13, 2026 | |
| 2019-2020 | July 9, 2019 | August 8, 2026 |
| October 10, 2019 | November 9, 2026 | |
| January 17, 2020 | February 16, 2027 | |
| June 10, 2020 | July 9, 2027 |
The above table provides the deadlines for the shareholders of the TCS, to claim their dividends by applying to the Company’s Registrar or the Transfer Agent. After the due dates, provided in the 3rd column, TCS will be forced to transfer the funds to the IEPF, along with the respective shares.
- For shareholders of erstwhile TCS e-Service Ltd. which has merged with the company:
| Financial Year | Date of Declaration | Last Date of Claiming Unpaid Dividend |
|---|---|---|
| 2012-2013 | May 30, 2013 | July 30, 2020 |
TCS e-Service Ltd. was merged with TCS Ltd. The shares of such shareholders are treated differently. Therefore, the above table provides the deadlines for the shareholders of the erstwhile TCS e-Service Ltd., to claim their dividends by applying to the Company’s Registrar or the Transfer Agent. After the due date, provided in the 3rd column, TCS will be forced to transfer the funds to the IEPF, along with the respective shares.
- For shareholders of erstwhile CMC Ltd. which has merged with the company:
| Financial Year | Date of Declaration | Last Date of Claiming Unpaid Dividend |
|---|---|---|
| 2012-2013 | June 26, 2013 | July 25, 2020 |
| 2013-2014 | June 23, 2014 | July 22, 2021 |
| 2014-2015 | June 11, 2015 | July 10, 2022 |
| 2015-2016 | July 16, 2014 | August 18, 2022 |
CMC Ltd. was merged with TCS Ltd. The shares of such shareholders are treated differently. Therefore, the above table provides the deadlines for the shareholders of the erstwhile CMC Ltd., to claim their dividends by applying to the Company’s Registrar or the Transfer Agent. After the due dates, provided in the 3rd column, TCS will be forced to transfer the funds to the IEPF, along with the respective shares.
An investor can check the status of their unclaimed dividend, declared by TCS, from https://www.tcs.com/unclaimed-dividend-details-from-february-10-2014-to-january-31-2020
For more information, visit https://www.tcs.com/content/dam/tcs/investor-relations/financial-statements/2019-20/ar/annual-report-2019-2020.pdf
Unclaimed Shares & Lost Dividend under IEPF
If the shares are not claimed within the 7 years, does it mean you will lose all your dividend income along with your shares?
As stated above, earlier, it used to happen that the government would utilize such funds for the public welfare, and the investor loses the rights over such income as well as shares. Therefore, the companies used to advise the investors to claim their dividend to prevent the loss of the dividend income and the shares. But now, with the introduction of IEPF, an investor does not lose his/ her right over the dividend and the shares. Then what is the reason for the companies advising you to claim dividends before the shares go into IEPF?
The reason why the companies still advise the investors to claim their dividend from the company by applying to the Company’s Registrar or the Transfer Agent, rather than claiming the refund of shares and the dividend amount from the IEPF, is that the process of claiming the refund of dividend and the shares from IEPF is tedious and cumbersome. IEPF takes time to refund the money and the shares to the rightful owner. The reason this is that the authority wants to ensure that the shares are transferred to the rightful owner. Thus, the claim applications go through heavy scrutiny before approval from IEPF authority.
Procedure to Claim Dividend and TCS Shares from IEPF Authority
TCS shareholders, whose shares and the unclaimed dividend has been transferred to the IEPF for they did not claim their dividend for the consecutive period of 7 years, as provided under Section 124 of the Companies Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, can claim their shares or unclaimed dividend amount from IEPF Authority.
Step 1: Contact TSR Darashaw Ltd.
The shareholder has to contact TSR Darashaw Ltd., which is the Company Registrar/ Transfer Agent of TCS. The shareholder has to obtain all the information like the year wise dividend entitlement, and all the shares transferred to the IEPF Authority.
Step 2: Download IEPF 5
The shareholder then has to visit the website of the IEPF Authority, http://www.iepf.gov.in/IEPF/refund.html, and download the Form IEPF 5. Then he has to fill in the form and upload it back on the website. This will be the online application filed by the shareholder.
Note: An individual can file one form in one financial year. However, he can make multiple claims in a single form. Thus, remember to put all the claims in one form.
Step 3: Physical Application
The shareholder then has to take a printout of the online form and send it to the Nodal Officer at the Registered Office of TCS, Mumbai. The application should be sent along with the required documents, which are self-attested (including the witnesses).
The required documents need to be attached are:
- Original Indemnity Bond: Duly signed by the claimant, joint holder, and two witnesses:
- Amount less than 10,000: On a plain paper
- Amount more than 10,000: On a non-judicial stamp paper of the value prescribed under the Stamp Act.
- Original Advance Stamp Receipt: Duly signed by the claimant, joint holder, and two witnesses.
- Proof of Entitlement
- Copy of Client Master List
- Copy of Aadhar Card
- Copy of PAN Card
- Copy of Passport, in case of NRIs
- Original Cancelled Cheque Leaf
- In case any joint holder is deceased, a notarized copy of the death certificate to be attached
- Other optional documents, (if any)
Note: All the above documents are required to be self-attested by the claimant and the joint holder (if any).
Step 4: Verification by TCS
TCS will then verify the details of the application, along with the claim and the various documents attached. It will then make a Verification Report and file it, along with the original documents and physical application filed by the claimant, with the IEPF Authority.
Step 5: Comment by the IEPF Authority
The IEPF Authority, based on the application, documents attached, and the report submitted, will give its decision. It can do either of the three things:
- Approve the claim and initiate the refund.
- Ask the shareholder to resubmit the required documents, in case of any discrepancy or any document not being legible
- Reject the claim
Step 6: What to do next?
- If the IEPF Authority asks the shareholder to resubmit the documents, then the shareholder has to send the said documents to the Nodal Officer at the Registered Office of TCS, Mumbai. The Nodal Officer will then forward the documents to the IEPF Authority.
- If the IEPF Authority rejects the claim, then the shareholder will have to repeat all the steps from starting and keep in mind the mistakes he had made while filing the first application.
For more information, visit https://www.tcs.com/content/dam/tcs/pdf/discover-tcs/investor-relations/faq/steps-to-claim-dividend-shares-iepf.pdf
Why do You Need Legal Help?
As seen above, filing an application for the refund of unclaimed dividends and lost shares to the IEPF Authority could be a tricky and tedious task. To ease out the process and ensure that there is no mistake in the application, one requires the help of a legal professional. Filing the application requires a certain degree of technical knowledge. Hiring a legal professional will suit you the best as he will do all the tasks; from collecting the information from the company about the dividend and shares to filing the said application.
If the shares are involved in the family dispute, then you definitely require legal help. Shares get involved in the family dispute when a shareholder, as stated above, dies without assigning a nominee or does not include the shares in his will. Now, every one of his kin would want a right over such shares, especially when the value of those shares is huge. No family member of a deceased person will want to let go of the shares of TCS that were bought by him in 2004. Therefore, a claimant needs to hire a legal professional or approach a legal firm to manage all the disputes related to ownership of the shares. A lawyer knows all the laws regarding the partition of the family assets, and he can provide you with the best deal.
To Conclude….
So, we have seen how the shares of TCS have increased in value over the period. If you just came to know that some TCS shares exist in your name, then it is the best time to redeem them, along with the dividend accumulated over time. Who knows, maybe you will become the next millionaire. It is also advised that you go through the tables provided above and find the expiry date by which you can claim the dividend. After identifying the date, apply for the dividend claim as soon as possible with the Company Registrar/ Transfer Agent, i.e., TSR Darashaw Ltd. Thus, avoiding the shares to be transferred to the IEPF. However, if your shares are already transferred to the IEPF, find a legal expert as soon as possible, and apply to the IEPF Authority for the refund of the unclaimed dividend and the recovery of the transferred shares.