“Dormant” the term denotes “inactivity or “inoperativeness”.
Likewise, a Dormant company is a term used to refer those companies which are registered under Companies Act, but remains inactive.
The reasons behind formation of such companies can be enumerated as below:
· Various companies invest in assets but utilise them after certain period of time therefore a dormant company holds onto such asset
· Businesses with intellectual property rights (IPR), such as patents, copyrights, and trademarks, may establish a dormant company to hold the IPR until it is put into effect.
· To embark on any project that is set for commencement in the near future.
It is advised to apply for the status of dormant company if the company was particularly founded with the intention of starting operations soon rather than after incorporation in order to keep minimum statutory compliance and ensure cost effectiveness.
Provisions under Companies Act, 2013
Section 455 of Companies Act, 2013 defines the term inactive accompany and states the provisions as when the Company should be considered as a Dormant Company, what are the conditions, criteria, and how a Dormant Company would operate.
Therefore, Companies who meet the criteria and eligibility requirement prescribed under Companies Act, 2013 may make an application seeking the status of Dormant Company in Form MSC-1.
Key Points for Dormant Companies
- No business operations/activities during last two financial year
- No significant accounting transactions during last two financial year
- No filing of financial statements and annual returns during the last two financial years
Eligibility for Dormant Companies
Rule 3 of The Companies (Miscellaneous) Rules, 2014 states that a Company shall be eligible for application for a Dormant Company:
· No inspection, inquiry or investigation has been ordered or taken up or carried out against the company;
· No prosecution has been initiated and pending against the company under any law;
· The company is neither having any public deposits which are outstanding nor the company is in default in payment thereof or interest thereon;
· The company is not having any outstanding loan, whether secured or unsecured: and if there is any outstanding creditors must provide no objection for the same.
· there is no dispute in the management or ownership of the company;
· the company does not have any outstanding statutory taxes, dues, duties etc. payable to the Central Government or any State Government or local authorities etc.;
· the company has not defaulted in the payment of workmen’s dues;
· he securities of the company are not listed on any stock exchange within or outside India.
Copy of Board Resolution
Copy of Notice and Explanatory statement calling General Meeting
Copy of Special Resolution passed at General Meeting
NOC from regulator if registered under any other Act
NOC from creditors if any
Copy of last filed financial statements
What is included in this
- Ascertain Eligibility Criteria
- Documents preparations
- Filing of E forms at MCA portal;
- Follow up with ROC;
- Dormant Status;
- 24*7 Mail Support;
1. What is Dormant/Inactive Company?
As per section 455 of Companies act, 2013 inactive company” means a 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;
2. WWhat is significant accounting transaction?
“significant accounting transaction” means any transaction other than
· payments made by it to fulfil the requirements of this Act or any other law;
· allotment of shares to fulfil the requirements of this Act; and
· payments for maintenance of its office and records.
3. What is the process to apply for Dormant Company?
Companies willing to seek status of Dormant Company should accord consent of Board through Board resolution. The Board will then convene general meeting to get consent of shareholders of the Company.
After the shareholders approval the Company will file necessary forms with Registrar of Companies.
4. What forms are required to seek status of Dormant Company?
MGT 14 and MSC 1 are required to file for making application of dormant Company
5. Can a Dormant Company gets a status of Active Company?
Yes, by making application in MSC 4 and return in MSC-3 with ROC.
6. What is a Company has not filed its annual statement for 2 years and still not applied for Dormant status?
In such cases Registrar shall issue a notice to that company and enter the name of such company in the register maintained for dormant companies.
7. What should be the minimum number of Directors for a Dormant Company?
A dormant company shall have a minimum number of 3 directors in case of a public company, 2 directors in case of a private company and 1 director in case of a One Person Company:
8. What is MSC 1?
MSC 1 is a certificate issued by the Registrar after considering application for dormant status.
9. What is MSC 3?
A dormant company shall file a “Return of Dormant Company” annually, inter-alia, indicating financial position duly audited by a chartered accountant in practice in Form MSC-3 along with such annual fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 within a period of thirty days from the end of each financial year.