Any company that does not trade or conduct business and does not have any significant transaction then the company can be registered as a dormant company with the registrar of companies. If a company is established and registered for the purpose of holding an asset or intellectual property or a future project and there are no significant accounting transactions, such a company or an inactive company may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company.
(i) A company is considered to be an “inactive company” if it has not conducted any business or operations, made any significant accounting transactions, or submitted annual returns and financial statements in the past two years.
The following is the definition of a Significant Accounting Transaction provided in the same section:
“any transaction other than
- making a fee payment to the ROC.”
- payment made in accordance with this Act or any other applicable law.
- Payment made to it to fulfill the requirements of this Act/any other law.
- Allotment of shares to comply with the requirements of this Act
- Payments for maintenance of its office & records.
That Company will be able to apply for the status of an Dormant Company if the following either A or B conditions are satisfied:
- Any of these
- Where a company is formed and registered for future project
- To hold an asset and intellectual property
AND
- The company has no significant Accounting Transactions
OR
- B) Any of these
- a) Not carrying any business operation
- Not made by significant accounting transactions in last 2 years
- Not filed financial statement and annual return for last 2 years
Application To Be Declared As A Dormant Company
A company can be a dormant company in the following ways
- SUO MOTO ( on its own motion )
- Conduct Board meetings and approve the resolution and call for general meeting
- Obtain Statement of affairs from a Chartered Accountant
- Conduct general meeting and pass special resolution
Within 30 days file following forms ;
* MGT 14
* MSC 1 (Attach Copy of special resolution , Copy of statement of affairs, Declaration by directors , Other necessary documents (NOC from creditors if any)
After filing of these forms ROC being satisfied shall grant status of Dormant Company in MSC 2(intimation sent by ROC approving Dormant Company)
- B) By Registrar of Companies
In case of a company which has not filed financial statements or annual returns for two financial years consecutively, the Registrar shall issue a notice to that company and enter the name of such company in the register maintained for dormant companies.
ROC shall not grant Dormant status in following cases
- Inspection,enquiry or investigations going on against the company
- Prosecution is pending against the company
- Public deposit are outstanding or default in payment
- Outstanding secured or unsecured loans (apply for Dormant by getting no objections from creditors (NOC to be attached in MSC 1)
- If there is any dispute in ownership/management
- Listed companies (Inside India or outside India)
- Defaulted in payment of workmen dues
- Outstanding taxes, duties to Central Government, State Government, Local authorities
A company can remain Dormant for a maximum period of 5 consecutive years, within the 5 years the company needs to apply for the active status. If it fails to do so, the name will be struck off from the register of companies.
Compliances to be followed by Dormant Company
- It shall have minimum number of directors as per law
- Private company should have 2 directors
- Public company should have 3 directors
- OPC should have 1 director
- Return of Dormant company (it is the form MSC 3 which have to be filed annually, it indicates financial position of the company duly certified by CA) (with in 30 days from closure of financial year )
- Conduct minimum 1 Board meeting in each half of calendar year, gap between 2 meetings should not be less than 90 days
- Company shall file return to ROC in case of change in director or allotment of securities
Company Seeking Status Of Active Company
1) Dormant Company has to file MSC 4(form for obtaining active status) and MSC 3 (financial position of the company.
Upon receipt of the Application ROC if satisfied shall change the status of the Company to active (Form MSC 5)
- If a company has contravened any conditions mentioned in grounds of application for obtaining Dormant Company status. Directors should with in 7 days of such contravention file an application for the status of active company
- On enquiry if the ROC believes that the company has been active. The company shall be removed as Dormant Company and will be made active.
Conclusion
The concept of dormant companies was introduced by Section 455 of the Companies Act, 2013. It is a Company which has been incorporated and registered under the Companies Act, 2013 but does not have any significant accounting transaction or is an inactive company which has applied to the Registrar to be declared as a dormant company. A company which hasn’t filed annual returns/financial statements for two consecutive financial years can also be declared as a dormant company by the Registrar.
FAQs on Dormant Company under Companies Act, 2013
1. Is it possible for a Dormant Firm to file for strike-off?
A company that has applied to the ROC for ‘Dormant’ status is ineligible to seek strike-off. To apply for a strike-off, the company must first attain the ‘Active’ status.
2. What is the Difference between Dormant and Inactive Company?
The Companies Act of 2013 established the notion of a dormant company. In a nutshell, a dormant company means an inactive company. The provisions of the Dormant Company are addressed under Section 455 of the Companies Act 2013.
3. How long may a business remain Dormant?
A company can only be declared “Dormant” for five years in a row before the ROC begins the process of removing the company’s name from the register.
4. How can I Reactive the company’s Active status?
An application in Form MSC-4 can be submitted to the Registrar to reinstate the active company status. The company will be restored to active status by the issuance of MSC-5 if the Registrar is satisfied with the application.
