DORMANT COMPANIES


Section 455 primarily deals with the provision regarding Dormant Companies. We need to understand inactive companies, first.

INACTIVE COMPANIES (EXPLANATION TO SECTION 455):

An Inactive company is a company which—

(a)  has not been carrying on any business or operation, or

(b) has not made any significant accounting transaction during the last two financial years, or

(c)  has not filed financial statements and annual returns during the last two financial years.

For the purpose of this definition, “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.

DORMANT COMPANY (SECTION 445):

Where a company is formed and registered under this 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.

The Registrar on consideration of the application shall allow the status of a dormant company to the applicant and issue a certificate.

The Registrar shall maintain a register of dormant companies.

In case of 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.

A dormant company shall have such minimum number of directors, file such documents and pay such annual fee as may be prescribed to the Registrar to retain its dormant status in the register and may become an active company on an application made in this behalf accompanied by such documents and fee as may be prescribed.

The Registrar shall strike off the name of a dormant company from the register of dormant companies, which has failed to comply with the requirements of this section.

OTHER PROVISIONS

Under Clause (40) of Section 2, for the purpose of Dormant Company, A cash flow statements is not part of their Financial Statements.

Under Sub – section (3) of Section 173, only one meeting of Board of Directors is required in each half of calendar year. There must be a gap of not less than ninety days is required between two board meetings.

Under Section 248, the Registrar may issue a notice to the company of his intention to declare it as a dormant company.

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.

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43 responses to “DORMANT COMPANIES

  1. Suppose a Company has paid up capital of Rs. 10 crore or more which means that there is a need for Committees like Audit Committee and NRC, Independent Director, KMPs. If such company applies for dormant status, will these requirements stll exist? Or will have to reduce the capital before applying?

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  2. Namrata Khera

    Procedure of dormant to active status. as our company has not filed annual return and financial statements for the last 4 yrs and now co. wants to file but in master data the status is dormant . so how to convert dormant into active

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  3. Does the company have to file form ADT1 for appointment of auditor?

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  4. If a company has not filed IT & Roc Last Year ,And now the company shut down and want to file MSC-1 ,Whether The Company has to file Previous Year Returns ?

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  5. Hi,

    I am running a proprietorship business, recently i came to know that another company with same name exists with a dormant status.

    Can i continue my business as proprietor and when i want to expand my business and want to make it pvt ltd can i choose another name at that time ? or should i change my business name right now ?

    How can i avoid legal issues later, do let me know.
    Thanks

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  7. Vinil jaiswal

    Hi sir,thanks for sharing informatio in a simple way.
    is it mandatory for dormant companies to file IT return & ROC Retuns?

    Like

  8. LAXMIKANT SARAF

    Sir,
    Please provide the specimen of auditor/CA certificate issued to make the company as dormant.

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  9. This is a very good article .I want to know whether a company which is in default of submitting annual return and financial statements for the last 10 years and yet to be struck off can make application for becoming a dormant company ? If so, can such application be made before regularisation ?

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  10. If the company has not filled balance sheet and annual return for last 4 years then will it be required to file the pending roc forms?

    Further if the last balance sheet relates to FY 2011-12 then what should be the period for which statment of accounts shall be attached with MSC1

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  11. Sir I wanted to know whether a decree holder can execute a decree against a dormant company.

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  12. Vishakha Panchangam

    Sir,
    I wanted to know whether a decree can be executed against a dormant company by a decree holder.

    Like

  13. Sir great article
    I want to know what is the benefit of obtaining the status of dormant company??
    If we just open a normal company and do not have any significant accounting transaction for 2 years and do not initiate the process of obtaining the status of dormant company??

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  14. what is the provision regarding acquisition of Dormant Company ?

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  15. what is the procedure for resignation of a director in a dormant company and what are the forms to be filed with ?

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  16. Anand Shirkande

    Hi, If anyone want to file a complaint and stop the process of activation of dormant status for private company, the what is the procedure?. I am a director of small firm. Currently status of firm is dormant. Other partners are planning to activate it . Once activation done then they are going to disolve the firm. We are having financial issues with each other. I want to settle down those issues before activation. Is there any way to stop activation process?

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  17. Hi, Thanks for valuable information. My father was having one firm with parterners. Current status is dormant. There are three directors each with 33% share. Two directors are ready to provide documents for activation. One director is not providing any document and not ready to for activation. Is it possible that with 66% share of two directors , Shall I activate dormant status for this firm? .. Please reply. Thanks in advance.

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  18. Poonam Bhatnagar

    Do these companies require to get its accounts audited?

    Also can a dormant status be obtained from the F.Y. 2014-15 because for F.Y. 2013-14 audit must have been conducted?

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  19. HOW TO RE ACTIVATE THE CO. FROM DORMENT

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  21. Dr A Ramasubramanian

    Companies Act, 2013 nowhere specifies whether the appointment of a full-time company secretary is mandatory for a dormant company with a paid up equity capital of more than 5 crore. Since dormant companies are not expected to have any income they cannot employ and remunerate a company secretary. In such a case, exemption from compulsory appointment of a full time company secretary should be given. This lacuna may be pointed out to the Govt authoritries

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  22. Good Article bt i havnt got tht if company has not filed retrun for precceding two years thn while making application of MSC 1 first we have to file annual returns too. and just a suggestion- if you provide fees too for the same thn it will be very much beneficial for us.

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  23. Can a company formed under company act 1956 can be treated as dormant company?
    because in law it is written “when a company formed and registered under this act”

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  24. Can a listed company fulfilling the criteria be a dormant company. Weather a dormant company is required to file balance sheet annual return etc.C

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