Section 205C – The Companies Act,1956

The Companies Act, 1956

205C. Establishment of Investor Education and Protection Fund.

1[205C. Establishment of Investor Education and Protection Fund.

(1) The Central Government shall establish a fund to be called the Investor Education and Protection Fund (hereafter in this section referred to as the “Fund”).

(2) There shall be credited to the Fund the following amounts, namely:

(a)amounts in the unpaid dividend accounts of companies;

(b)the application moneys received by companies for allotment of any securities and due for refund;

(c)matured deposits with companies;

(d)matured debentures with companies;

(e)the interest accrued on the amounts referred to in clauses (a) to (d);

(f)grants and donations given to the Fund by the Central Government, State Governments, companies or any other institutions for the purposes of the Fund; and

(g)the interest or other income received out of the investments made from the Fund:

Provided that no such amounts referred to in clauses (a) to (d) shall form part of the Fund unless such amounts have remained unclaimed and unpaid for a period of seven years from the date they became due for payment.

Explanation.For the removal of doubts, it is hereby declared that no claims shall lie against the Fund or the company in respect of individual amounts which were unclaimed and unpaid for a period of seven years from the dates that they first became due for payment and no payment shall be made in respect of any such claims.

(3) The Fund shall be utilised for promotion of investors’ awareness and protection of the interests of investors in accordance with such rules as may be prescribed.

(4) The Central Government shall, by notification in the Official Gazette, specify an authority or committee, with such members as the Central Government may appoint, to administer the Fund, and maintain separate accounts and other relevant records in relation to the Fund in such form as may be prescribed in consultation with the Comptroller and Auditor-General of India.

(5) It shall be competent for the authority or committee appointed under sub-section (4) to spend moneys out of the Fund for carrying out the objects for which the Fund has been established.]


(i) A dividend once declared is a debt payable by the company to its registered shareholders. Dividend is deemed to have been paid, once a dividend warrant is posted at the registered address of the shareholders; Hanuman Prasad Gupta v. Hira Lal, (1970) 40 Comp. Cas. 1058: 1970 (2) Com LJ 195: AIR 1971 SC 206.

(ii) If a company is wound up before distributing its accumulated profits, any distribution of profits by liquidator is not regarded as dividend under the Companies Act. The amounts so distributed to the shareholders are therefore distributed as capital of the company since the liquidator has no power to distribute dividend; Commissioner of Income Tax v. Girdhardas and Co. Pvt. Ltd., 1967 (1) Com LJ 1: AIR 1967 SC 795.


1. Ins. by Act 21 of 1999, sec. 12 (w.r.e.f. 31-10-1998).

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The Companies Act, 1956

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