Register a Dormant Company

The Concept of Dormant Company

The concept of Dormant Company is introduced under section 455 of the Companies Act, 2013 read with The Companies (Miscellaneous) Rules, 2014 and came into effect from 1st April, 2014. Basically, it’s the status of company which becomes dormant.

Definition of Dormant Company

Dormant company in general means temporarily inactive. As per provision of Companies Act, 2013 any company can apply for dormant status of the company by making application to Registrar, if it fulfills the required conditions.

Significant Accounting Transactions

"Significant accounting transaction" means any transaction as mentioned below:

• Payment of fees by a company to the Registrar.
• Payments made by company to fulfill the requirements of this Act or any other law.
• Allotment of shares to fulfill the requirements of this Act.
• Payments for maintenance of company's office and records.

Eligibility Criterion

If a company satisfies any of the following conditions, then it can apply for dormant company:

• Company is formed and registered under the companies act, 2013 for:
  • Any future project
  • Holding an asset or intellectual property
• Company has no significant accounting transactions since its incorporation or during the last two financial years.
• Company has not carried out any business or operations since its incorporation (more than one year).

Disqualifying Criterion

There are several disqualifying criteria that prevent a company from applying for dormant status, including:

• Any inspection, inquiry, or investigation has been ordered or taken up or carried out.
• Any prosecution has been initiated or is pending under any law.
• Company has any outstanding loan.

Advantages of Dormant Company

Some of the advantages of a dormant company are:

• Company needs not to file two (2) forms for Annual filing i.e. MGT- 7 and AOC-4 each year.
• No requirement to hold Annual General Meeting every year.
• No need to hold and convene four (4) Board Meetings in a year, etc.

Which Company Can Apply for Dormant Status?

Any company which is incorporated for a future project or holds an asset or intellectual Property and has no significant accounting transaction or inactive company can apply for dormant status of the company.

Note that “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.

Basic Compliances for Dormant Company

The basic compliances for a dormant company include:

• Company needs to file return in E-form MSC-4
• Company needs to have the minimum number of directors as required by the Companies Act, 2013
• Other event-based compliances.