Dormant Company

If a company is formed and registered under the companies Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company.

Section 455 of the Companies Act, 2013 and Companies (Miscellaneous) Rules, 2014 specify the law and procedure regarding dormant company.

Terms to be known :

(1) Inactive company :

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) Significant Accounting transaction :

Significant accounting transaction means any transaction other than,

(a) payment of fees by a company to the Registrar,
(b) payments made by it to fulfil the requirements of this Act or any other law,
(c) allotment of shares to fulfil the requirements of this Act and,
(d) payments for maintenance of its office and records.

Normally The Registrar shall maintain a register of dormant companies in such form as may be prescribed.

If a company which has not filed financial statements or annual returns for two financial years consecutively, the Registrar shall issue a notice to that company and enter the name of such company in the register maintained for dormant companies.

If a company has failed to comply with the requirements of this section then the registrar can strike off the name of that company from the list of dormant companies.

Following are various forms to be filled in connection with dormant company

MSC 1 :- Application for obtaining status of dormant company, certificate that there is no dispute in the management or ownership of the company, there is any outstanding unsecured loan obtaining concurrence of the lender.

MSC 2 :- Certificate allowing the status of a Dormant Company.

MSC 3 :- Return of dormant companies

MSC 4 :- Application for seeking status of an active company

MSC 5 :- Certificate allowing the status of an active company to the applicant

Following are the relevant provisions in companies rules 2015.

(1) A Company may make an application in Form MSC-1 to the Registrar for obtaining the status of a Dormant Company in accordance with the provisions of Section 455 after passing a special resolution to this effect in the general meeting of the company or after issuing a notice to all the shareholders of the company for this purpose and obtaining consent of at least 3/4th shareholders (in value)

(2) But a company is eligible to apply for this only if it meets the following criteria

(i) no inspection, inquiry or investigation has been ordered or taken up or carried out against the company

(ii) no prosecution has been initiated and pending against the company under any law

(iii) the Company is neither having any public deposits which are outstanding nor the company is in default in payment thereof or interest thereon

(iv) the company is not having any outstanding loan, whether secured or unsecured

(v) there is no dispute in the management or ownership of the company and a certificate in this regard

(vi) 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.;

(vii) the company has not defaulted in the payment of workmen’s dues;

(viii) the securities of the Company are not listed on any stock exchange within or outside India.

(3) Minimum number of directors :

A dormant company shall have a minimum number of three directors in case of a public company, two directors in case of a private company and one director in case of a One Person Company:Providedthat the provisions of the Act in relationto the rotation or auditors shall not apply on dormant companies.

(4) Return of dormant companies :

(a) 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 within a period of thirty days from the end of each financial year.

(b) Provided that the company shall continue to file the return or returns of allotment and
change in directors in the manner and within the time specified in the Act, whenever the
company allots any security to any person or there is any change in the directors of the company.