(i) Meaning: The dividend which has not been paid to the shareholders within 30 days of its declaration is called ‘unpaid dividend’. If the declared dividend is not claimed by the shareholders and remains unpaid with the company’s bankers, it is called ‘unclaimed dividend’ The amount of final dividend as well as interim dividend may remain unpaid/unclaimed.
(ii) Provisions: The provisions in respect to unpaid or unclaimed dividend as incorporated under section 205 of the Companies Act, 1956 are stated as follows:
a. Unpaid dividend account: When dividend is not paid to or claimed by shareholders within a period of 30 days from the date of its declaration, the company is required to transfer the amount of unpaid or unclaimed dividend to a separate account called “Unpaid Dividend Account of ……… Company Limited/Company (Private) Limited.” In any scheduled bank within 7 days after the expiry of 30 days of declaration of dividend.
b. Penal Interest: If a company fails to deposit the amount of unclaimed dividend into a separate bank account within a period of 7 days from the date of expiry of declaration of dividend, it is liable to pay interest on the amount not transferred @ 12% p.a. Such amount of interest is paid to the members who have not been paid or claimed dividend in proportion to their dues.
c. Transfer of Investors’ Education and Protection Fund: According to the provision of Section 205(A) of the Companies Act, 1956, if the amount of unpaid dividend remains in the account for 7 years from the date of transfer to this account, a company is required to transfer such amount together with interest due on it to “Investors’ Education and Protection Fund” (IEPF), as established by the Central Government.
d. Payment of unpaid /unclaimed dividend: Any person entitled to any amount transferred to IEPF is required to make application for refund to the authority or committee appointed by the Central Government. On verifying the evidences or documents. If the authority or committee is satisfied that such person is legally entitled to receive refund, it makes an order for payment of such amount due.
e. Penalty: If any company commits default in compliance of above requirements, such company and every officer of the company responsible for the lapse or default shall be punishable with fine upto Rs. 5000 per day during which the default continues.