TRACING

"MISSING"
SHAREHOLDERS

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One of the reasons why individuals and institutions invest in companies is to
receive returns on an annual basis. There have been several cases in which the
dividends announced, and sought to be paid to individual investors, have
remained unpaid because the company could not establish contact with them at
their last known address.

To ensure that such amounts do not remain with the companies for indefinite
periods, the Companies Act, 2013 has provided as under in Section 124 (1) of the
Act.

“Where a dividend has been declared by a company but has not been paid or claimed
within thirty days from the date of the declaration to any shareholder entitled to the
payment of the dividend, the company shall, within seven days from the date of
expiry of the said period of thirty days, transfer the total amount of dividend which
remains unpaid or unclaimed to a special account to be opened by the company in
that behalf in any scheduled bank to be called the Unpaid Dividend Account.”

Subsequent thereto, the Investor Education and Protection Fund Authority

(Accounting, Audit, Transfer and Refund) Rules 2016, SEBI LODR Regulations, 2015
and the Secretarial Standards have also given rise to procedural and substantive
improvements in the manner in which such funds are to be dealt with.

This is a set of well-intentioned legislative provisions to ensure that companies do

not become unjustly rich by holding on to amounts which belong to shareholders,
who have remained unidentified or uncontacted. The Investor Education and
Protection Fund (IEPF) is an instrumentality to hold these until such time as the
legitimate claimants thereto are able to establish the bona fides of their claims.

Year after year, companies send communications to these shareholders at their last
known addresses. This is done either directly, or through the Registrar and
Transfer Agents (RTAs), or by both these entities acting together. The predictable
outcome is that these communications evoke no response since they are the same
addresses to which earlier communications were sent, and were not responded to.
There could be a number of reasons for this situation. It is possible that some of the
shareholders have moved to new addresses, and have not informed either the
company, or anyone else, regarding their new address. It is equally possible that
some shareholders have passed away, with their family members being unaware
of the existence of the shares in the names of their forebears.

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Recognising the seriousness of the problem, Excellence Enablers decided to
reach out to the top 100 listed entities, by market cap, to ascertain whether, in
addition to sending mails to the last known address, there were any other steps
that the companies were taking, to identify, and contact the “missing”
shareholders. Regrettably, even after a few reminders, and indicating that this
was a pro bono public service initiative that Excellence Enablers had
launched, only 25 companies responded. Out of those that had responded, 4
companies stated that they were not doing anything in addition to sending
mails to the last known addresses. Some of them, including companies that have
not yet completed 7 years post their listing, expressed an interest in getting to
know what additional measures were being taken by other companies. Overall, the
number of responses, and the nature of responses, seemed to indicate that this was
not a matter to which many companies attached adequate importance.
Interestingly, one company required us to mention our 16 digit DP id and Client id
to respond.

Not discouraged by this situation, we have undertaken an analysis of the responses

received from companies who have, in different ways, tried to reach out to these
shareholders. The report which has been compiled, points to the possibility that if
some innovative measures are adopted, at least a small dent could be made in the
problem.

What we have looked at is the ‘stock’ element of the problem. It is necessary for
companies to ensure that by continuous contact with shareholders, the ‘flow’
element of the problem can be addressed. Separately, it might be necessary to
revisit the procedures that companies and the IEPF follow, to expeditiously deal
with the claims that have been preferred by some of these shareholders.

It is our hope that the importance of this matter finds resonance with companies,
and investor organisations, so that over time the problem gets addressed, at least to
some extent.

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DIMENSIONS OF THE PROBLEM

Statement showing shareholding pattern of the Public shareholder under

shareholding pattern as on March 2022

Total number of shares held

S. No. Name of the Company Percentage of shareholding
under IEPF
Abbott India Ltd
1 1,00,396 0.47
(available information for FY21)
2 ACC Ltd 13,31,005 0.71
3 Adani Green Energy Ltd 33,858 0
4 Adani Ports and Special Economic Zone Ltd 2,17,274 0.01
5 Adani Transmission Ltd Listed in July, 2015 -
6 Alkem Laboratories Ltd Listed in December, 2015 -
7 Ambuja Cements Ltd 36,38,290 0.18
8 Asian Paints Ltd 11,07,007 0.12
9 Aurobindo Pharma Ltd 7,51,449 0.13
10 Avenue Supermarts Ltd Listed in March, 2017 -
11 Axis Bank Ltd 8,85,636 0.03
12 Bajaj Auto Ltd 1,91,805 0.07
13 Bajaj Finance Ltd 3,44,260 0.06
14 Bajaj Finserv Ltd 95,185 0.06
15 Bajaj Holdings & Investment Ltd 94,527 0.08
16 Bandhan Bank Ltd 7,70,630 0.05
17 Bank of Baroda Not given -
18 Berger Paints India Ltd 61,38,860 0.63
19 Bharat Petroleum Corporation Ltd Not given -
20 Bharti Airtel Ltd 1,55,607 0
21 Biocon Ltd 1,09,362 0.01
22 Bosch Ltd 36,957 0.13
23 Britannia Industries Ltd 6,18,116 0.26
Cadila Healthcare Ltd
24 14,08,541 0.14
(now Zydus Lifesciences Ltd)
25 Cipla Ltd 26,17,275 0.33
26 Coal India Ltd 1,17,973 0
27 Colgate-Palmolive (India) Ltd 4,06,208 0.15
28 Container Corporation Of India Ltd 3,134 0
29 Dabur India Ltd 27,34,891 0.15
30 Divis Laboratories Ltd 26,946 0.01
31 DLF Ltd 8,56,425 0.03
32 Dr. Reddys Laboratories Ltd 2,27,182 0.14
33 Eicher Motors Ltd 20,44,800 0.75
34 GAIL (India) Ltd 2,44,152 0.01
35 General Insurance Corporation of India Ltd Listed in October, 2017 -
36 Godrej Consumer Products Ltd 25,10,905 0.25
37 Grasim Industries Ltd 28,10,204 0.43
38 Havells India Ltd 2,28,365 0.04
39 HCL Technologies Ltd 2,11,647 0.01
40 HDFC Asset Management Company Ltd Listed in August, 2018 -

Source: Annual reports/ Stock exchange filings

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 41 HDFC Bank Ltd 68,68,463 0.15
42 HDFC Life Insurance Co Ltd 1,269 0
43 Hero MotoCorp Ltd 9,85,405 0.49
44 Hindalco Industries Ltd Not given -
45 Hindustan Petroleum Corporation Ltd 2,49,940 0.02
46 Hindustan Unilever Ltd 52,76,685 0.22
47 Hindustan Zinc Ltd 2,44,714 0.01
48 Housing Development Finance Corporation Ltd 15,82,971 0.09
49 ICICI Bank Ltd 75,45,883 0.13
50 ICICI Lombard General Insurance Co Ltd Listed in September, 2017 0.07
51 ICICI Prudential Life Insurance Company Ltd Listed in September, 2016 0.06
52 Indian Oil Corporation Ltd 3474480 0.04
53 Indraprastha Gas Ltd 1,94,051 0.03
54 Indus Towers Ltd 1,081 0
55 IndusInd Bank Ltd 15,43,901 0.22
56 Info Edge (India) Ltd 8,226 0.01
57 Infosys Ltd 2,79,039 0.01
58 Interglobe Aviation Ltd Listed in November, 2015 -
59 ITC Ltd 2,58,77,179 0.21
60 JSW Steel Ltd 1,53,76,099 0.64
61 Kotak Mahindra Bank Ltd 33,55,015 0.17
62 Larsen & Toubro Infotech Ltd Listed in July, 2016 -
63 Larsen & Toubro Ltd 28,84,754 0.21
64 Lupin Ltd 7,23,140 0.16
65 Mahindra & Mahindra Ltd 24,57,866 0.2
66 Marico Ltd 58,544 0
67 Maruti Suzuki India Ltd 20,427 0.01
68 Motherson Sumi Systems Ltd 7,00,076 0.02
69 Muthoot Finance Ltd 9,391 0
70 Nestle India Ltd 1,04,043 0.11
71 NMDC Ltd 36,230 0
72 NTPC Ltd 11,00,591 0.01
73 Oil & Natural Gas Corporation Ltd 12,78,491 0.01
74 Oracle Financial Services Software Ltd 47,322 0.05
75 Petronet LNG Ltd 16,43,507 0.11
76 Pidilite Industries Ltd 4,18,418 0.08
77 Piramal Enterprises Ltd 8,08,461 0.34
78 Power Finance Corporation Ltd 89,597 0
79 Power Grid Corporation Of India Ltd 10,37,986 0.01
80 Procter & Gamble Hygiene & Health Care Ltd 91,306 0.28
81 Punjab National Bank Not given -
82 Reliance Industries Ltd 3,43,83,043 0.52
83 SBI Cards And Payment Services Ltd Listed in March, 2020 -
84 SBI Life Insurance Company Ltd Listed in October, 2017 -
85 Shree Cement Ltd 74,110 0.21
86 Siemens Ltd 7,49,506 0.21
87 State Bank Of India Not given -
88 Sun Pharmaceutical Industries Ltd 20,33,839 0.08
89 Tata Consultancy Services Ltd 5,56,402 0.02
90 Tata Consumer Products Ltd 36,24,428 0.39
91 Tata Motors Ltd 56,43,861 0.17
92 Tata Steel Ltd 48,93,283 0.4

Source: Annual reports/ Stock exchange filings

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 93 Tech Mahindra Ltd 11,67,243 0.12
94 Titan Company Ltd 36,90,650 0.42
95 Torrent Pharmaceuticals Ltd 1,81,426 0.11
96 Ultratech Cement Ltd Not given -
97 United Breweries Ltd 15,47,648 0.59
98 United Spirits Ltd 33,52,090 0.46
99 UPL Ltd 15,58,180 0.2
100 Wipro Ltd 20,56,801 0.04

Source: Annual reports/ Stock exchange filings

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Standard practices followed by companies

Reminding the shareholders, through general meeting / postal

ballot notices, regular bulk emails and letters, and publication of
notice in newspapers / on website.

Well before the scheduled AGM, publishing a newspaper

advertisement, requesting shareholders to register/ update
their email ids.

Publish advertisement in local newspapers (English/local

language).

Writing, or sending reminder letters, to the last available address.

Reaching out to the shareholders on their telephone/mobile

numbers available in the records.

Helping the joint account holder, where one has passed away,
with the process and documentation (in addition to educating
them about the process etc).

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Newer practices followed by some companies

Updating Know Your Customer (KYC) details of shareholders, from

time to time, including availing sms sending services of National
Securities Depository Limited (NSDL) and Central Depository
Services Limited (CDSL). This is used to update/capture email ids of
shareholders holding shares in demat mode, or those who are
availing web portal services of RTA. Such services are used
throughout the year, for shareholders to update their email ids and
bank particulars.
Once an email id is registered in the database of RTA, whether
in physical folio or demat account, any communication is sent
on the updated email id only.

Mapping the address and contact details of the shareholders with

PAN details, as there are many shareholders who may hold more
than one demat account, and can have different correspondence
addresses.

Engaging company’s resources in various territories to go and

check in the neighbourhood of the shareholder’s last known
address, to elicit further information.

Sending Office Assistants to shareholders’ residence whose

aggregate unclaimed dividend was in excess of a certain
amount.
Preparing a list of recommended diligence measures to be
observed, whilst contacting the concerned shareholders, and
providing the same to the branches/ office assistants, inter alia
including questions that could be asked to the neighbours or
househelps, etc. Persons going for these tasks are also instructed
to obtain certain specified documentary evidence from the
shareholder/ legal heir so as to obviate the risk of fraud/
misrepresentation.
At times, the local company’s resources share/ accept documents
from the shareholders locally, instead of sending/ receiving the
documents to the RTA/ Company by post.

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 Using shareholders to contact other shareholders.

Using RTA to contact/ update shareholders.

Try to get details of the concerned IEPF shareholders, from the
database of RTA with respect to other companies, based on
PAN, so that if a shareholder is active in another company, but
was not aware about holding/dividend in one company, he/she
could be reached out to.

Approaching shareholders, on their registered email ids, through a

personalised official email id, instead of generic ids from service
providers / RTA.

Providing a list of shareholders, whose consolidated unclaimed

dividend is more than a certain amount, to the Chairperson and the
Senior Management every year in December/January, which is
much prior to the due date for claiming the dividends. The
rationale for this is that they might know some of the shareholders
due to the shareholder’s long association with the company. They
in turn share the latest available contact information of such
shareholders with the Secretarial department. The secretarial
department then gets in touch with all those shareholders, and
informs them of the process for claiming their dividends.

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 Using Google and Linkedin to identify the whereabouts of a few
shareholders. While doing this, data privacy is respected, so that no
personal details of the shareholders are communicated through
social media platforms. This has especially helped find
shareholders who are abroad.

Using the help of an external agency, which has been able to

contact a few shareholders/ legal heirs of the shareholders. After
due verification, such persons have been informed about the claim
process. The agency can also be engaged for updating the records,
and to help demat shares of physical share holders.

Prior to April 2018, duplicate dividend warrants (at par cheques)

were sent to the concerned banks in respect of shareholders, where
their bank details were available, but the MICR/ IFS code was not
available. However, pursuant to SEBI circular dated April 20, 2018,
unclaimed dividends have to be paid only electronically. Hence, in
cases where the shareholders have updated their bank account
details with the company/depositories post payment of dividend
for the respective FY, the outstanding unclaimed dividend has been
directly credited electronically, without insisting on a request from
the shareholder.

In respect of shareholders whose shares have been dematerialized,

unclaimed dividend(s) have been credited into the bank account
registered in the demat account of the shareholder.

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 Pursuant to SEBI Circular dated April 20, 2018, updation of bank
account details is mandatory. However, even if a shareholder
approaches the company for other services such as transmission/
change of name, etc., and updates his/ her bank account details, all
the unclaimed dividend lying against the said folio is credited to
his/her account. In such cases, a request for claiming dividend from
the shareholder/ legal heir is not required.

Matching of the latest bank details in the folios with the old bank
details, and wherever it was observed that the members have
registered new bank details, but have not claimed old dividends,
the amount is released proactively.

Analysing data of unclaimed dividend for all the years, wherein

shareholders have updated bank account details post declaration
and payment of dividend by the Company. Based on the analysis,
emails are sent to the shareholder(s), specifically mentioning the
fact that they have updated their bank account details post
declaration of dividend. The email also contains details such as
amount of dividend unpaid, FY wise, along with corresponding due
dates of IEPF transfer. For ease of shareholders, the email provides
“Click here to approve” link. On clicking the link, the shareholder is
required to verify the bank account details, and click on approve
button. Post this approval, the RTA initiates payment of unclaimed
dividend.

Send sms to the shareholders, reminding them to claim their

dividend.

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 Using technology such as introducing bar code/QR code for
updating records.

Analysing the unclaimed dividend data sent by RTA, on the basis of

where the demat account was opened. Basis this, the company was
able to track down a large number of shareholders, who were the
employees of the company, and had participated in the IPO of the
company.

Contacting institutional and corporate shareholders through the

secretarial team.

Using of Artificial Intelligence (AI), with the company’s internal IT

Analytical team. This would depend on the availability of data
through public sources.

Approaching the local post offices in cities where the number of

untraced shareholders is high. This is in addition to reaching out to
them through franchisees/ company networks.

Approaching NGOs to help trace shareholders.

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Additional measures that we,
at Excellence Enablers,
think that companies can consider

To engage students residing in the localities/ towns/ cities, where

the “missing investors” used to reside, to talk to their former
neighbours, post office officials and others, to get some leads on
where they might have shifted. This could be done by students
during their vacation and they could be incentivised for this
purpose.

Registered Investor Associations could also be reached out to for

assistance/ suggestions. If the list of “missing investors” from the
Association’s area of coverage is circulated among their members,
there could be some success.

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Suggestions sent to SEBI by
companies

SEBI could ask depositories (NSDL and CDSL) to set up a process of

periodical KYC (eg every 3 years). This will not only ensure that the
investors contact details are updated, but will also ensure timely
delivery of all corporate communication and shareholder benefits
from companies to its shareholders. The end result of this initiative
will be better investor servicing and significant reduction in the
number of shareholders’ complaints / grievances for listed entities.

Under current processes at depositories, the demat account holders

are not allowed to change some of their details (e.g residential
status, name in case of body corporate etc.) The processes for other
changes are also complex and time-consuming. To address these
complexities, SEBI could mandate the depositories to make the
processes simple and flexible, without compromising on the
compliances and control. This will enable many of the investors to
update their records.

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 What the numbers say?
From the responses of companies to our mails, the following are seen to be
undertaking, or planning to undertake, the following specific additional efforts -

8 companies have tried to trace the shareholders by requesting their employees

and/or branch managers to personally visit the neighbourhood of the untraceable
shareholders.

4 companies have tried to trace the shareholders by availing the services of

external agencies.

6 companies have tried to trace the shareholders through their mobile numbers.

2 companies have availed the SMS sending services of NSDL and CDSL to
update/capture email ids of shareholders.

6 companies have availed the services of RTAs for trying to trace the
shareholders.

2 companies have tried reaching out to the shareholders by mapping their old
bank details, with the updated details.

2 companies have tried to get the details of concerned shareholders based on

their PAN from database of other companies available with RTAs.

3 companies tried to contact shareholders, and credit the past amounts, if they
have contacted the company for any other work.

Some other initiatives tried are

Reaching out through other shareholders.
Reaching out through Post offices and NGOs.
Contacting employees who had subscribed to the IPO of the company.
Using the contact information available with the Chairperson or the senior
management personnel.
Updating KYC periodically.
Sending emails through personalised email ids, and not generic ids.
Using artificial intelligence to access public information.
Using barcodes and QR codes to update information.
Using social media, networking sites or search engines to trace shareholders.

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 Annexure 1 – Mail sent by us

Dear ……

Trust this mail finds you well, and that 2022 will be a lot better than the preceding year.

One of the sticky problems, which corporate India has been continuing to grapple with is
the issue of unclaimed dividends, leading to their transfer to the IEPF after a period of 7
years. In more recent times, even the shares standing in the names of investors, who
have remained untraced or unreachable, have been transferred to the IEPF.

The normal practice for most companies has been to write to the last known address of
such shareholders, either directly or through the RTA. In a very large majority of the
cases, the communication remains undelivered and/or unacknowledged for a variety of
reasons. Sending similar communications every year to the same addresses, has
understandably borne no fruit.

To address this problem, some companies have resorted to out-of-the-box methods, such
as engaging some persons to follow up at the local level, starting with the last known
address, to ascertain whether the shareholders have either relocated or have passed on.
This approach has led to some shareholders being traced at their new addresses, which
they had not communicated to the companies. In a few cases, this has led to survivors of
deceased shareholders, who had remained in the dark so far, reaching out to the
companies to stake their claim.

It is likely that your company has also resorted to some unusual methods to attempt to
reach such shareholders or their descendants. Could you kindly share with us the details
of any such measure(s) that you have resorted to, and the success thereof? Our
endeavour is to share these practices with the larger corporate universe so that
companies that are yet to do anything different, can benefit from such experiences. We
will, unless you have reservations, share the name of the company which has resorted to
any out-of-the-box practice, and the results thereof.

This being a pro bono activity in the interest of the small and forgotten shareholders, we
look forward to a response at your earliest convenience.

Warm regards
Damodaran

M. Damodaran
Chairperson, Excellence Enablers Private Limited
Former Chairman, SEBI, UTI and IDBI

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Annexure 2 - Companies that provided
information (in alphabetical order)

1 Aurobindo Pharma Ltd

2 Bharat Petroleum Corporation Ltd
3 Biocon Ltd
4 Cipla Ltd
5 Eicher Motors Ltd
6 General Insurance Corporation of India Ltd

7 Havells India Ltd

8 Hero MotoCorp Ltd

9 Hindalco Industries Ltd

10 Housing Development Finance Corporation Ltd

11 Hindustan Zinc Ltd

12 ICICI Lombard General Insurance Co Ltd

13 Interglobe Aviation Ltd

14 Larsen & Toubro Ltd

15 Lupin Ltd
16 Muthoot Finance Ltd

17 Nestle India Ltd

18 Reliance Industries Ltd

19 SBI Cards And Payment Services Ltd

20 State Bank Of India

21 Tata Consumer Products Ltd

22 Tata Steel Ltd

23 Tech Mahindra Ltd

24 Titan Company Ltd

25 UPL Ltd

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About Excellence Enablers
We are a niche Corporate Governance advisory firm. We do not attempt
to be all things to all persons. Improving Corporate Governance policies
and practices is our raison d'etre. Our mission is to demystify Corporate
Governance and to persuade corporates that it is nothing more than
doing the right things at the right time in the right manner for the right
reasons.

We do not tick boxes. We help you think out of the box.

For any further information on the survey, please contact:

Ms Divyani Garg
[email protected]
+91 9650012066

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 CONTACT US
+91 11 43595444-445
[email protected]
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