The Securities and Exchange Board of India (Sebi) on November 8, 2023 released a uniform process regarding how investors can claim unclaimed funds in entities with listed non-convertible securities, real estate investment trusts (Reits), and infrastructure investment trusts (InvITs).
The new guidelines, effective March 1, 2024, streamline the process for investors’ convenience. These developments follow Sebi’s approval in September 2023 of amendments related to Investor Protection and Education Fund (IPEF) disclosure. The circulars define the handling of unclaimed amounts, their transfer to IPEF, and the claiming process by investors. Sebi has also standardised the transfer process to escrow accounts and investor claims for listed entities, REITs, and InvITs.
Sebi mandates REITs, InvITs to distribute at least 90 per cent of net distributable cash flows (NDCFs) to unitholders, and these distributions must occur semi-annually. However, some distribution amount remains unclaimed due to various reasons, including failure to update account details by unitholders.
Sebi has laid down that any amount remaining unclaimed or unpaid out of the distributions declared by a REIT, InvITs shall be transferred to the IPEF. Also, any unclaimed amount in a listed entity’s escrow account under regulation 61A (2) of the Listing Obligations and Disclosure Requirements (LODR) regulations must be transferred to IPEF after seven years. In addition, the listed entity should complete this transfer, along with any accrued interest, within 30 days from the expiration of the seven-year period, Sebi said in a circular.
If the listed entity defaults on this transfer, it faces a penalty of Rs 1 lakh. For continuous failure, an additional penalty of Rs 500 per day is levied up to a maximum of Rs 10 lakh.
Any investor claiming to be entitled to any unclaimed amount lying with the listed entity may apply to the listed entity for payment of such amount, in the format and manner as prescribed by the listed entity. Legal heirs or nominees must follow the same process subject to Sebi’s LODR regulations for claims