On 9th September 2024, the Ministry of Corporate Affairs (MCA) issued G.S.R. 552(E) to amend the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016. These amendments were made under the authority granted by the Companies Act, 2013 and aim to streamline procedures related to the transfer, refund, and audit of securities. The changes came into effect upon their publication in the Official Gazette.
Key Amendments:
- Terminology Update: The word “shares” in the original rules has been substituted with “securities” to ensure broader coverage of different financial instruments like bonds, debentures, and other securities.
- Legal Heir Certificate Acceptance: The amendment simplifies the process of transmitting securities by allowing the use of legal heir certificates issued by a revenue authority (Tahsildar or above), along with a notarised indemnity bond and a no-objection certificate (NOC) from other legal heirs. Previously, this process required an order from the Tribunal.
- Valuation of Securities: For listed securities, the value must be calculated based on the closing price from a recognized stock exchange on the day before submission. For unlisted securities, the value will be based on the face or maturity value, whichever is higher.
- Increased Financial Limits: The financial limit for securities transmission processes has been increased from ₹5 lakhs to ₹15 lakhs, reflecting updated financial requirements considering current economic conditions.
- Provisions for Foreign Nationals and NRIs: A new provision allows foreign nationals and NRIs to submit a self-declaration for lost or misplaced securities, which must be notarised or apostilled in their country of residence. They are also required to submit copies of their passport and proof of overseas address.
- Contingency Insurance Requirement: The new rules require companies to take out contingency insurance policies to cover the risk of claims related to verification reports. This ensures additional protection against risks arising during the process of transmitting or verifying securities.
Conclusion:
These amendments aim to make the transmission and refund process for securities more efficient, transparent, and accessible. By accepting legal heir certificates, updating financial limits, and including foreign nationals, the rules address modern-day requirements. The introduction of contingency insurance also ensures that companies are protected from potential risks in the verification process. Overall, the updates enhance investor protection and streamline corporate governance.
