Guide to Registering a Dormant Company

Dormant Company

The concept of Dormant Company was first introduced in the Companies Act, 2013 in India in order to grant the dormant status to the inactive companies or inoperative companies by following a prescribed procedure. Moreover, it protects the inactive and inoperative companies from undertaking mandatory compliances. The concept of Dormant Company is expounded under Section 455 of the Companies Act, 2013.

Any company which is not carrying on any business operations or not making any significant accounting transactions from the past 2 years or the company has failed to file its annual returns or financial statements from atleast past 2 years is eligible to apply before the Registrar of Companies for procuring the status of Dormant Company.

In this blog, we will explain the concept of Dormant Company, its benefits and other related impressions.

 

Which Companies can apply for Dormant Company?

Both newly incorporated company and previously active companies can apply for dormant company. Any company can make application before the ROC for obtaining the status of Dormant Company, when the following criteria is satisfied –

  1. There must not have been any inspection, investigation or inquiry has been ordered or carried out against the applicant company.
  2. The Company must not have any outstanding public deposits not it shall have made any default in payment of outstanding public deposits or any interest thereon.
  3. There must not be any prosecution started or pending against such company under any law for the time being in force.
  4. The company shall not have made any default in the payment of workmen’s dues at the time of application.
  5. There shall not be any outstanding statutory dues, duties or taxes etc that are payable to the Central Government or any State Governments or any local authorities etc at the hand of company otherwise it shall be disqualified.
  6. The securities of the company must not be listed on any stock exchange whether within or without India in order to obtain dormant status of the company.
  7. The company should not have any secured or unsecured outstanding loan. However, if there is any then the company must obtain the concurrence of all the lenders and then such concurrence shall be attached in the Dormant Company Application Form MSC-1.
  8. There must not be any dispute in the ownership or management of the company and the same must be certified. This certificate shall be enclosed with the Form MSC-1 (Application form).

 

How any company can obtain the status of Dormant Company?

  1. The first and foremost step is to convene a Board Meeting whereby the Directors shall pass a Board Resolution for procuring the status of Dormant Company.
  2. In the Board meeting, the Board shall authorize atleast one of the directors to make application for obtaining the status of Dormant Company before ROC. Moreover, it shall appoint an Auditor or Chartered Accountant to sign and certify the application.
  3. Thereafter the company shall issue a notice to hold an Extra Ordinary Meeting (EGM). The notice must be in a prescribed format that is it must include certain details such as the date, time, place and agenda for the EGM.
  4. In the EGM, shareholders shall pass a Special Resolution to permit the company to apply for Dormant Status.
  5. Subsequently, the company shall file Form MGT-14 with the ROC within 30 days from the date of passing resolution.
  6. As soon as the above steps are completed, the company shall make an application before the Registrar of Companies in the Form MSC-1 along with the requisite fee.
  7. Thereafter, the Registrar shall consider the application and thus issue the certificate in MSC-2Form. This certificate shall allow the status of a dormant company.
  8. Albeit the company has obtained the status of dormant company, the company has to file financial statement duly audited by the chartered accountant within 30 days from the date of end of financial year in the Form MSC-3.

 

What business transactions a dormant company can undertake?

  1. A dormant company can pay any fee to the Registrar.
  2. It can make any outstanding payment to fulfill the obligations of Companies Act, 2013 or any other law for the time being in force.
  3. A dormant company can also make payments in respect of its offices and records.
  4. It can allot shares to fulfill the requirements of the act.
  5. The dormant company must hold atleast one Board Meeting in each half of a calendar year. Provided the difference between the 2 such meetings shall not be less than 90 days.

 

How to reactivate the status of Dormant Company as Active Company?

The dormant company can convert its status from dormant to active company at anytime by following the prescribed procedure. The Company must file an application before the ROC for converting the dormant company status into an Active Company in the Form MSC-4. The application must be filed in the Form MSC-4 along with the requisite fee. Moreover, the application shall also be accompanied with the returns filed in the Form MSC-3. Thereafter, the Registrar shall consider and review the application. The Registrar shall, on being satisfied with the application, issue a certificate to the applicant in the Form MSC-5 for allowing the status of the Dormant Company into the Active Company. Once the Company becomes the active company, it shall be eligible to undertake any business transaction which an active company can carry out.

 

Conclusion

We hope now you must know the meaning, status and other related concepts of Dormant Company. In case you have any further queries/clarifications related to Dormant Company then contact your Trustworthy Advisors Manthan Experts to guide you through the Dormant Company just by dialing at +91-9643-969-969 or mail at info@manthanexperts.com.

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