Section 455 | Companies Act, 2013 | Dormant Company

Article explains What is A Dormant Company, Who Should Apply For Dormant Company Status, Procedure For Obtaining Dormant Status, Dormant Status Of Company By Registrar Suo Moto, Points To Be Considered Before Making The Application For Dormant Company and Dormant Company To Become Active Company.

What is A Dormant Company

The word “Dormant” means inactive or inoperative. A company may make an application to obtain the status of a Dormant company if,

1. It was formed for a future project or to hold an asset or intellectual property and it has no significant accounting transaction.

2. It is an Inactive company.

“Inactive” here means a company which has not been carrying any business or operation or,

A company which has not made any significant accounting transaction or not filed financial statements and annual returns during last 2 financial years.

“Significant accounting transaction” here means any transaction other than

• Payment of fees by a company to Registrar
• Payment made to fulfil the requirement of this Act or any other Law
• Allotment of shares to fulfil the requirement of this Act and
• Payment for maintenance of its office and records.

Who Should Apply For Dormant Company Status

– When the company is Inactive and is not in current position to operate business for next few years.

– Where the company will be doing business in the near future.

– Where the management of the company is not in position to determine whether they should keep the company due to recurring compliance costs and is unable to reach to a conclusion when they may restart the working of the company.

Procedure For Obtaining Dormant Status

1. Consent of at least 3/4^th shareholders (in value) is obtained either by passing a Special resolution in general meeting of the company or by issuing notice to all the shareholders of the company.

2 File form MSC-1 to the Registrar along with the prescribed fees.

3. After considering the application made by the company, the Registrar shall issue a certificate in Form MSC-2 and allow the status of a dormant company.

4. The Registrar shall maintain a register of dormant companies in the prescribed forms.

Dormant Status Of Company By Registrar Suo Moto

If a company does not file financial statements or annual returns for 2 consecutive financial years, the Registrar shall issue a notice to that company and enter the name of such company in the Registrar maintained for dormant companies.

The dormant company is not exempted from the statutory compliances of submission of annual returns and also holding annual meetings etc.

Points To Be Considered Before Making The Application For Dormant Company

• There should have been no inspection, inquiry or investigation ordered or taken up or carried out against the company.
• There should be no prosecution initiated or pending against the company under any law.
• The company should have no outstanding deposits and should not have defaulted in payment of the amount or interest.
• The company should not have any outstanding loan, whether secured or unsecured. The company should disclose the same with Form MSC-1
• There should be no dispute in the management or ownership of the company and a certificate in this regard is enclosed with Form MSC-1
• The company should not have any outstanding statutory taxes, dues, duties etc. payable to the Central or State Government or local authorities etc. and also not defaulted in the payment of workmen’s dues;
• The securities of the company should not be listed on any stock exchange within or outside India

Dormant Company To Become Active Company

A Dormant company may become an active company by making an application in Form MSC-4 along with prescribed fees and form MSC-3 with respect to the financial year in which the application seeking active status is being filed.

Once satisfied, the Registrar will issue the certificate in Form MSC-5 allowing the status of an active company.

If a company fails to comply with anything mentioned under the grounds of the application for status of Dormant company, then the Directors shall apply for obtaining the status of an active company within 7 days of such an act or omission.

If the registrar has a reason to believe that the company that has applied for the dormant company status has been actually functioning, after completing enquiry and also after giving the company a reasonable opportunity to be heard, may treat the company as an active one.

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Disclaimer: The above article is only for information purpose and is on based on the author’s interpretation of the relevant provision. The same should not be considered as professional advice.