Article explains What is Dormant Company, advantages of dormant company, Which company can apply for dormant status, process to apply for Dormant Status of Company, For how long a company can remain dormant company, What are the compliances for dormant company, How can a company become active again?
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What is Dormant Company?
The concept of Dormant Company is introduced under section 455 of the Companies Act, 2013 read with The Companies (Miscellaneous) Rules, 2014 and came into effect from 1st April, 2014. Basically it’s the status of company which is becomes dormant.
Dormant company in general means temporarily inactive. As per provision of Companies Act, 2013 any company can apply for dormant status of the company by making application to Registrar, if it fulfils the required conditions.
What are advantages of dormant company?
Some of the Advantages of dormant company are:-
- Company needs not to file two (2) forms for Annual filing i.e. MGT- 7 and AOC-4 each year;
- No requirement to hold Annual General Meeting every year;
- No need to hold and convene four (4) Board Meetings in a year, etc.
Which company can apply for dormant status?
Any company which is incorporated for future project or hold an asset or intellectual Property and has no significant accounting transaction or inactive company can apply for dormant status of the company.
Note that “Inactive Company” means company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years.
What is the process to apply for Dormant Status of Company?
A company if it falls fulfils the conditions as provided in above point, may apply for getting Dormant Status of the company and the process is given below:-
- Fixing and convening the Board Meeting for approval from Board and also approving the notice of General Meeting to take approval from Members of the company for making an application of dormant status of the company;
- Convening of General Meeting and passing of Special Resolution by members;
- Filing of MGT-14 form within thirty (30) from passing of Special resolution in General Meeting;
- Filing of E-Form MSC-1 to Registrar i.e. application for dormant status of company;
- Registrar will consider and approve the application and will issue a certificate for Dormant Status of Company, if satisfied.
For how long a company can remain dormant company?
A company may retain its status of Dormant Company for five (5) years once it has been dormant company status, after it Registrar may strike off the name of the company from the register of companies.
What are the compliances for dormant company?
- Company needs to file return in E-form MSC-4
- Company needs to have minimum number director as required by Companies Act, 2013
How can a company become active again?
A company can apply for active status by filing E-Form MSC-4 to registrar. After vetting of application registrar issue a certificate in Form MSC-5 and company will once again revert to active status.
Applying a Dormant Status for the company has its pros and cons, which should be considered before going for it.
Disclaimer: The above article is extract of provision of Annual General Meeting under The Companies Act, 2013 and the interpretation is purely based on the existing information, any further amendments in provision may lead to change in its interpretation accordingly.
(The Author is Corporate Consultant and can be contacted through email id:- triptishakyacs2017@gmail.com)
Author Bio
MSC 4 is not the return to be filed. Rather MSC 3 is the return to be filed by Dormant Companies.
MSC 4 is the form to apply for status dormant to active.