Dormant status of a company

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Dormant status of a company

Dormant Company was a concept introduced in Companies act, 2013. Dormant Company does not have a definite clause. It is the type of company which is not active and made for future perspective. In section 455 section it is mentioned.

In section 455 there are types of company which are formed and registered under this Act for a future project or to hold an asset or intellectual property and it has no significant accounting transaction. An application is made to the registrar in such manner as may be prescribed.

An inactive company is a type which has not been carrying on any business or operation or has not made any significant accounting transaction during the last two financial years. Companies have not filed financial statements and annual returns during the last two financial years. The dormant company also means any active company doing regular business and regular accounting transactions but it fails regarding mandatory annual documents.

Here are some points significant accounting transaction defined in order to clear out any ambiguity

• Fee payment by the company to the Registrar.
• Payment by other requirement or may fulfil other law.
• Share allotment to fulfil requirement of the act.
• Maintenance cost of office and records.

These are the types companies required to have minimum directors which can have two board meeting and file minimum one annual financial document with the Registrar. In some cases the dormant company can have its status as active.

Here are some rules regarding dormant company

MSC 1-Application for seeking-No inspection inquiry, NO prosecution under

Application for obtaining status can only be made after obtaining special resolution approval or issuing a notice to all the shareholders. Public deposit or interest is not there for the company. It has no outstanding loan, secured or unsecured. In case of any unsecured loans then the consent of the lender should be obtained and enclosed along with the form. The dormant company does not have any outstanding tax dues either to central or state government or local authorities. These types companies are not listed company.

Minimum number of Directors (In public company as 3 and Private limited as 2)

MSC 2-Certificate of Registrar

MSC 3- Return of Dormant Company- This indicates the financial position of the company and which shall be duly audited by a chartered accountant in practice.

MSC 4-Application for active status-Company can revert an active status by making another application along with requisite fee.

MSC 5- Certificate of Application Status

There are some rules which state that dormant company cannot remain as a dormant company for more than 5 consecutive financial years. If it remains so, the company will be removed. A maximum number of years company can be dormant is 5 financial years.

Sometimes, Registrar has a doubt that a dormant company has been indulging in business activities and in fact, it is not dormant then he can take necessary action to revert its status to an active company.

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