What is a Dormant Company?
When a Company do not file the statutory annual filings (i.e. form 23AC, 23ACA & 20B) for a consecutive period of 3 years, the MCA (ministry of corporate affairs) puts the status of the company as 'dormant (for eFiling)' like shown below:
However this dormant efiling status does not make the company as a 'Dormant Company' in its strictest meaning.
as of now, there is no
special concept or rules for a Company to be declared as a Dormant Company.
However in other countries the concept of dormant company is quite
prevailing. Below are the excerpt of some of the regulations for
dormant companies in other countries. India
In UK, the Companies House require the dormant companies to file the Annual Return with the dormant accounts with the Registrar of Companies, in addition to this the companies are also required to inform the HMRC (Her Majesty's Revenue and Customs) that the Company is a dormant company, so as the filing of the corporation tax return can be avoided.
One of the common intention behind making a dormant company is to protect the ownership of a business name, generally people like to register/ incorporate a company with their choice of name as an early step to register the same.
Dormant Company - Introduced in Companies Act 2013
With the coming into force of Companies Act 2013, a Company can obtain the status of Dormant company.
Under section 455 of the companies act 2013- 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.
Above “significant accounting transaction” means any transaction other than—
(a) payment of fees by a company to the Registrar;
(b) payments made by it to fulfill the requirements of this Act or any other law;
(c) allotment of shares to fulfill the requirements of this Act; and
(d) payments for maintenance of its office and records.
The Registrar on consideration of the application shall allow the status of a dormant company to the applicant and issue a certificate in such form as may be prescribed to that effect.
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. (Note: Dormant Companies will not be required to include cash flow statement in the financial statements.)
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.
In case the dormant company fails to the requirements of this section, the Registrar can strike off the name of such dormant company from the register of dormant companies.
A dormant company is required to conduct at least one meeting of the Board of Directors in each half of a calendar year and the gap between the two meetings is not less than ninety days.