Dormant Companies under Companies Act, 2013

Invest now to excel later is the simple fundamental with which Dormant company provisions were brought to light. There might be a situation where you have a great idea in mind and you think there are certain constraints with respect to funds, the timing of commencement of venture, other required resources this is what will help you the concept of dormant companies.   With the commencement of Companies Act, 2013, the persons with object of starting their business on a later date than the date of registration of the company can go ahead and form a company and keep the same to hold as per the provisions of the dormant companies under the provisions of Companies Act, 2013 (known as “the Act”).

As per the Act, a company can be incorporated with a minimum of 2 directors and 2 members in the case of a private company and 1 member in the case of OPC whereas 3 directors and 7 members in the case of a public company.

Dormant Company

A company that is inactive and an application for the said status of  Dormant has been made or is taken cognizance suo – moto by the Registrar shall fall under this category.

Inactive company:

As per the explanation to Section 455(1) of Companies Act, 2013:

• a company which has not been carrying on any business or operation in the last 2 financial years, 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.

Implications of Status as Dormant Company

• Such companies need not hold the meetings of members;
• Such companies can hold fixed assets for future projects;
• Such companies can hold Intellectual property rights;
• Such companies cannot indulge in any significant accounting transaction.

List of non –eligible companies

For existing companies before making an application for the status of a dormant company following needs to be taken care of:

• no inspection, inquiry or investigation has been ordered or taken up or carried out against the company;
• no prosecution has been initiated or pending against the company under any law;
• the company is neither having any public deposits which are outstanding nor there is any default in payments of any such deposits in the past.
• Where the company is not having any outstanding loan or if there is any, the consent of the lender has been obtained
• Where there is no dispute in the management or ownership of the company;
• Where the company does not have any outstanding statutory taxes, dues, duties, etc. payable to the Central Government
• Where the company has not defaulted in the payment of any workmen’s dues.

Mandatory Filing by Dormant Company

Every registered company has to file certain documents on an annual basis and some of which are event-based filings. For a dormant company, the mandatory filing to the Registrar of companies include:

Annual compliance

As per Section 455 Read with Rule 3 of companies (Miscellaneous) Rules, 2014 as amended from time to time, every company needs to file Return of Dormant Company within a period of 30 days from the end of Financial year.  Such form shall be filed in Form MSC – 03.

The return shows the financial position of the company which is duly certified by the Practicing Chartered Accountant.

Event-Based Filing

• Appointment/ Resignation of Director(s).
• Allotment of shares
• any such change.

Such dormant company can perform certain transactions which are as follows:

• Payment of government fee by a company  to the Registrar
• Payments made by it to fulfill the requirements of the Act  or any other law
• Allotment of shares to fulfill  the requirements of Act
• Payments for maintenance of its office and records.

Procedure for Application by Company for  seeking the status of Dormant Company

1. Prepare the application in Form MSC -01 along with
2. File the application with a prescribed fee with the Registrar of Companies on the MCA portal.
3. The department can seek clarification or information on the application filed as it may deem fit.
4. The department can approve on conclusive application and issue certificate of Dormant Company or can seek more information as it deems feasible.

Attachments for Form MSC -01:

1. Copy of Authorization
   1. Board Resolution –  Approval from  majority directors; and
   2. Special Resolution – Approval from members in the general meeting passed with 2/3^rd majority of members present in the meeting.
2. Auditors Certificate certifying that all the compliance has been met.
3. Statement of Affairs duly certified by the Chartered Accountant or Auditors of the company.
4. Consent of the lender if any loan is continuing.
5. Any other relevant attachments as required/ demanded by the Registrar (ROC).

Therefore, every newly formed company or existing company can apply for the status of the Dormant company which is liable for certain restrictions for operations. If a dormant company remains dormant for consecutive 5 years, the registrar may suo – moto initiate the process of striking off after sending a notice.

Need to apply for a Dormant company?

Reach us at info@cs-india.com

Also Read: Trade License under Shop and Establishment Act, 1954

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