Receive Daily Updates by Email (Free Subscription)
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.
In India 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.
In Hong Kong, a private company may pass and deliver to the
Registrar of Companies a special resolution declaring that the company will
become dormant. Although a private company which is deemed to be a dormant
company under section 344A of the Companies Ordinance will be exempt from
filing annual returns, a company is still required to submit an annual return
for the year in which it declares itself to be dormant if the date
on which the company is deemed to be dormant falls
after the 42nd day after the anniversary of its date of incorporation.
In Singapore, a Dormant company is not required to have their financial accounts audited. Though there will not be any account audit, still the companies are required to file the annual return.
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
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
(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
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.