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Investor Education and Protection Fund

Investor Education and Protection Fund

The Central Government shall establish a Fund to be called the Investor Education and Protection Fund.

Section 125 of the Companies Act, 2013 contains provisions relating to Investor Education and Protection Fund.

Amount to be transferred to the Fund

There shall be credited to the Fund—

          (a) The amount given by the Central Government by way of grants after due appropriation made by Parliament by law in this behalf for being utilized for the purposes of the Fund;

          (b) Donations given to the Fund by the Central Government, State Governments, companies or any other institution for the purposes of the Fund;

          (c) The amount in the Unpaid Dividend Account of companies transferred to the Fund under sub-section (5) of section 124;

          (d) The amount in the general revenue account of the Central Government which had been transferred to that account under sub-section (5) of section 205A of the Companies Act, 1956 (1 of 1956), as it stood immediately before the commencement of the Companies (Amendment) Act, 1999, and remaining unpaid or unclaimed on the commencement of this Act;

          (e) The amount lying in the Investor Education and Protection Fund under section 205C of the Companies Act, 1956 (1 of 1956);

          (f) The interest or other income received out of investments made from the Fund;

          (g) The amount received under Section 38(4);

          (h) The application money received by companies for allotment of any securities and due for refund;

          (i) Matured deposits with companies other than banking companies;

          (j) Matured debentures with companies;

          (k) Interest accrued on the amounts referred to in clauses (h) to (j);

          (l) Sale proceeds of fractional shares arising out of issuance of bonus shares, merger and amalgamation for seven or more years;

          (m) Redemption amount of preference shares remaining unpaid or unclaimed for seven or more years; and

          (n) Such other amount as may be prescribed:

No such amount referred to in clauses (h) to (j) shall form part of the Fund unless such amount has remained unclaimed and unpaid for a period of seven years from the date it became due for payment.

Statement of amounts to be credited to investor education and protection fund shall be filed in Form DIV 5.

Utilization of the Fund

Section 125(3) states that the Fund shall be utilized for—

          (a) The refund in respect of unclaimed dividends, matured deposits, matured debentures, the application money due for refund and interest thereon;

          (b) Promotion of investors’ education, awareness and protection;

          (c) Distribution of any disgorged amount among eligible and identifiable applicants for shares or debentures, shareholders, debenture-holders or depositors who have suffered losses due to wrong actions by any person, in accordance with the orders made by the Court which had ordered disgorgement; The disgorged amount refers to the amount received through disgorgement or disposal of securities.

          (d) Reimbursement of legal expenses incurred in pursuing class action suits under sections 37 and 245 by members, debenture-holders or depositors as may be sanctioned by the Tribunal; and

          (e)  any other purpose incidental thereto, in accordance with such rules as may be prescribed:

Any person claiming to be entitled to the amount referred in section 125(2) may apply to the authority constituted under section 125(5) for the payment of the money claimed.

Administration of the Fund

The Central Government shall constitute, by notification, an authority for administration of the Fund consisting of a chairperson and such other members, not exceeding seven and a chief executive officer, as the Central Government may appoint. The manner of administration of the Fund, appointment of chairperson, members and chief executive officer, holding of meetings of the authority shall be in accordance with such rules as may be prescribed.

The Central Government may provide to the authority such offices, officers, employees and other resources in accordance with such rules as may be prescribed.

The authority shall administer the Fund and maintain separate accounts and other relevant records in relation to the Fund in such form as may be prescribed after consultation with the Comptroller and Auditor-General of India.

 It shall be competent for the authority to spend money out of the Fund for carrying out the objects specified in Section 125(3).

The accounts of the Fund shall be audited by the Comptroller and Auditor- General of India at such intervals as may be specified by him and such audited accounts together with the audit report thereon shall be forwarded annually by the authority to the Central Government.

The authority shall prepare in such form and at such time for each financial year as may be prescribed its annual report giving a full account of its activities during the financial year and forward a copy thereof to the Central Government and the Central Government shall cause the annual report and the audit report given by the Comptroller and Auditor-General of India to be laid before each House of Parliament.

Investor Education and Protection Fund

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