Unclaimed Dividends

Unclaimed dividend is the declared dividend by a company which is not encashed or claimed by the shareholders. The Companies Act of 1956 mandates that dividends not paid or claimed in 30 days are transferred to a separate bank account. An investor can claim his dividends from this account anytime in the next 7 years. After that, it goes to the Investor Education and Protection Fund (IEPF) which is managed by the Ministry of Corporate Affairs.

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Unclaimed dividend are those dividend which have been paid by the company but they are not claimed by the shareholder, the reason for dividend being not claimed may be because shareholder may have shifted to other place or address change not updated and therefore missed the dividend cheque. Unclaimed dividends are shown under current liability and provisions in the balance sheet of the company, since shareholder can claim these dividends anytime. An investor may face such problems because of following reasons:

Outdated records: Unclaimed Dividend largely exists due to incorrect or outdated details of a shareholder in company’s records. Non-intimation of change of address or other details to the respective company results in mismatch of investor’s database with various authorities.

Non-execution of transfer: Shares purchased by an investor remain in the name of the seller due to non-execution of transfer in the name of the buyer. This happens when an investor holds physical shares.

Non-execution of transmission:It happens when a legal heir or successor fails to ‘transmit’ shares in his name after the death of an investor in whose name shares or debentures are actually held in company’s records, leading to unclaimed corporate benefits including dividends etc.