Procedure to Activate a Dormant Company under Companies Act, 2013

APPLICABLE SECTION AND RULES

• Section 455
• Rule 8 of Companies (Miscellaneous) Rules,2014

APPLICABLE FORMS

• Application in Form MSC-4
• Annual return of that financial year – MSC-3
• ROC issue certificate in MSC-5 (allowing the status of an active Company to the applicant)

STEP BY STEP PROCESS REQUIRED

1. Convene a Board Meeting to obtain the approval of the Board to make an application for changing the status of the Company from dormant to active Company.

2. Make an application in Form MSC-4 accompanied by a return in Form MSC-3 in respect of the financial year in which the application for obtaining the status of an active Company is being filed.

3. After considering the application, the ROC, issue a certificate in Form MSC-5 allowing the status of an active Company to the applicant.

CONCLUSION

Registrar shall initiate the process of striking off the name of the Dormant Company if the Company remains as a Dormant Company for a period of consecutive five years.

FAQS On Conversion of Dormant Company into Active Company under Section 455 of the Companies Act, 2013

1. What is meant by “Active Company” in the context of a Dormant Company?

An Active Company refers to a company which resumes or intends to resume business operations and therefore applies to the Registrar for change of status from Dormant to Active under Section 455 of the Companies Act, 2013 read with Rule 8 of the Companies (Miscellaneous) Rules, 2014.

2. When is a Dormant Company required to apply for Active Status?

A Dormant Company shall apply for active status:

• When it proposes to commence business operations; or
• When it undertakes any transaction inconsistent with dormant status; or
• When any event occurs that affects the conditions based on which dormant status was granted.

The directors must file an application within seven days of such event.

3. What happens if a Dormant Company carries on business without applying for active status?

If the Registrar has reason to believe that a Dormant Company has been functioning, directly or indirectly, the Registrar may:

1. Initiate inquiry under Section 206 of the Act;

2. Provide opportunity of being heard; and

3. Remove the company from the register of dormant companies and treat it as an Active Company.

4. Whether the Registrar can Suo Motu change the status of a Dormant Company?

Yes. If the Registrar finds that the Company is operational in any manner, he may remove the company from the register of Dormant Companies and treat it as an Active Company after providing an opportunity of being heard.

5. What happens if a Company continues to remain dormant for a long period?

If a company continues to remain dormant for five consecutive years, the Registrar shall initiate the process of striking off the name of the Company from the Register of Companies.

6. What are the consequences of delay in applying for active status after triggering event?

If the company fails to apply within seven days of occurrence of the triggering event, it may be treated as non-compliant, and the Registrar may initiate enquiry proceedings and reclassify the company as active with penal consequences under the Act.

7. Is shareholder approval required for conversion into an Active Company?

The Rules primarily require Board approval and filing of prescribed forms. However, the company must ensure compliance with its Articles of Association and internal governance requirements, wherever applicable.

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Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com).