Dormant Company: Procedure, Eligibility, Fees

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Procedure, of Dormant Company


Where a company is formed and enrolled for a future task or to hold a resource or intellectual property and has no critical financial transaction, such company or an inactive company might make an application to the Registrar for acquiring a status of the Dormant Company.

Table of Contents

What is a Dormant Company?

Dormant Company implies a company which has not been continuing any business or activity, or has not made any critical accounting transactions during the last two monetary years, or has not documented financial statements and yearly returns during the last two financial years.

The essential goal of the amendments made to the Companies Act 1956 was to have an improved law that will actually want to address the progressions occurring in the public and worldwide situation, empower the reception of globally acknowledged prescribed procedures and furthermore give adaptability because of the consistently changing plans of action.
One similar angle which was presented in the Companies Act,
2013 was the idea of Dormant Companies in Section 455 of this Act.

The “Inactive Company ” means a company that has not carried on any business or activity, or has not made any significant financial transactions during the past two financial years, or has not completed financial statements and annual returns during the past two financial years.

  • Important financial activity ’’ means any transaction other than
  • Payment of company fees by the Registrar;
  • Payments made by it for the purposes of this Act or any other law;
  • Allocation of shares to meet the requirements of this Act; and
  • Fees payable for the maintenance of its office and records.

In like manner speech, “Dormant” signifies inactive or inoperative. A dormant company is a brilliant chance to begin a company for a future task or hold a resource/intellectual property without having critical financial exchanges. Then again assuming a company has not documented its yearly returns for two sequential years then such a company will likewise be called a dormant company.

Huge financial transactions would mean exchanges other than the fundamental procedural exchanges i.e the instalment of expenses by a company to the Registrar and furthermore instalments to satisfy the necessities of this Act or some other law, distribution of offers to satisfy the prerequisites of this Act and instalments for support of its office and records.

What are the benefits of Dormant Company?

The principle motivation behind procuring or keeping an organization’s remarkable position is to empower the organization to keep up with its corporate status regardless of whether it does any business.

The advantages got from that condition can be summed up under the accompanying headings –

  • Company Name Protection – Intellectual property claimed by a dormant company incorporates a brand name of a company name. The company name is ensured with the goal that others are not permitted to exchange under the name of the dormant company.
  • Future Project – A company might be shaped to get ready for a future task. This implies the plan of the advertisers to exchange and along these lines to keep the space name.
  • Company History – While this isn’t the main advantage, by building up a company that began and later began a business, it tends to be said to have been grounded since its initiation despite the fact that it might have gone into business later. It assists the company with showing a superior picture to expected clients and/or loan specialists.

What is the eligibility to obtain status of dormant company?

The Company will be able to apply for the status of an Unemployed Company if the following 8 conditions are satisfied:

  • No investigations, inspections, or investigations have been ordered/taken/performed for the company.
  • No prosecution has been instituted against the company under any law.
  • The Company does not have arrears of public funds and does not pay taxes on it and its interest.
  • The Company does not have outstanding loans whether they are secured or unsecured.
    If any outstanding loan exists, the company may apply after obtaining the lender’s approval and filing the same on the MSC-1 form.
  •  There is no dispute in the management/administration of the company and a certificate in this regard is attached to the MSC-1 form.
  • The Company does not have any official fees, taxes, duties, or other charges payable to any CG or SG or local authorities, etc.
  • The company did not fail to pay employees’ salaries.
  • The security of any company is not registered on any stock exchange within or outside India.

One more necessity under the Companies Act (Miscellaneous) Regulations 2014, Rule 6 is that a dormant company should have at least 3 directors on account of a public company, 2 assuming it is private and one on the off chance that there is One Private Company. The Registrar then processes the application and approves the status of the dormant company in the form of MSC-2.

Documents required for obtaining status of Dormant Company

  • An ensured duplicate of the choice of the board approving the execution of the arrangement.
  • An ensured duplicate of the extraordinary request approving the obtaining of convenience, for accommodation to the agent on Form MGT-14.
  • Auditor’s Certificate
  • The news explanation is properly guaranteed by the Chartered Accountant or the company’s auditor.
  • A duplicate of approval of opposition certificate (NOC) from the controlling expert if the organization is constrained by that power.
  • The most recent financial statements and yearly company returns are needed to connect in case of a comparable documenting to the Registrar
  • Buyer’s assent assuming the loan is outstanding
  • Certificate of disputes between management or ownership

What is the procedure to obtain status of dormant company?

Following is the procedure to obtain status of dormant company:

  • Convene a Board Meeting with two Directors or by a larger part of Directors.
  • Hold the Board meeting and pass the goal for getting the situation with Dormant Company. Fix a date, spot, and time plan for an Extra-Ordinary General Meeting of the Company.
  • Issue notification recorded as a hard copy requiring the General Meeting of the Company proposing the goal, with an appropriate illustrative proclamation.
  • Holding an Extra-Ordinary General Meeting and passing the Special Resolution, in the regular gathering.
  • File Form MGT 14 within 30 days of passing the goal.
  • Company will make an application in Form MSC-1 alongside such charge as given in the Companies (Registration Offices and Fees) Rules, 2014.
  • The Registrar will, in the wake of considering the application documented in Form MSC-1, issue an endorsement in Form MSC-2 permitting the situation with a Dormant Company to the candidate.
  • The Register kept up with under the gateway kept up with by the Ministry of Corporate Affairs on its site or some other site told by the Central Government, will be the register for torpid organizations.
  • Every organization will document Financial position appropriately reviewed by a sanctioned bookkeeper ought to be recorded inside 30 days from the finish of the monetary year in Form MSC 3.

Compliances made by the dormant company after obtaining status of dormant company

  • A dormant company will keep few directors.
  • The dormant company will present an “Return of Dormant Company” reviewed by a Chartered Accountant chipping away at Form MSC-3 within 30 days from the finish of each monetary year.
  • As far as Section 173 (5), the Dormant Company is needed to gather somewhere around one gathering of the Board of Directors held each piece of the schedule year and the hole between the two gatherings isn’t under 90 days.

Reactivation of Dormant Company

  • The Dormant Company should make an application for change of Dormant Company status into an Active Company in Form MSC-4.
  • The fees as recommended under Companies (Registration Offices and Fees) Rules, 2014, ought to likewise be paid with an application petitioned for Conversion of Dormant Company into Active Company. The MSC-4 ought to be joined by the return Form MSC-3 of the Dormant Company.
  • Subsequent to considering the application documented, the Registrar can support the application and issue an authentication in Form MSC-5, permitting the situation with the Dormant Company to be an Active Company.

Final words

As far as Section 455 of the Companies Act, 2013 Dormant Company is a jobless organization that has not led any business or has not made critical monetary exchanges during the last two monetary years.

Such organizations might apply to the Registrar for the situation with a dormant company. Simultaneously, the Registrar may and may direct such an organization on account of a dormant company.

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CS Urvashi Jain is an associate member of the Institute of Company Secretaries of India. Her expertise, inter-alia, is in regulatory approvals, licenses, registrations for any organization set up in India. She posse’s good exposure to compliance management system, legal due diligence, drafting and vetting of various legal agreements. She has good command in drafting manuals, blogs, guides, interpretations and providing opinions on the different core areas of companies act, intellectual properties and taxation.

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