Under section 205(i) of the companies Act, 1956 a fund is established by the Central Government called Investor Education and Protection fund. This fund will be used for the purpose of promotion of investors awareness and protection of investors [section 205C (3)].
The sources from which the fund will be collected are as follows [section 205(2)]:-
- Matured and unpaid deposits with companies.
- Amount of unpaid dividends.
- Matured debentures with the companies.
- Application money received by company for the purpose of allotment of any securities and due for refund.
- Interest accrued on the amount referred above.
- Interest or other income received out of investment from the fund.
- Grants and donations from the Central Government, State Government, companies or any other institutions. The amount due for payment by company will not become the part of the fund for 7 years. If investors/shareholders do not claim the amount within 7 years, then the company is in the position to transfer the prescribed amount to the authority of the fund. The liability of the company ends as soon as the funds are transferred.
An authority or a committee is formed by the Central Government for the administration of the fund. It is the duty of the authority to see that the money is spent in carrying out the objects for which the fund has been established.
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