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DORMANT COMPANY

WHAT IS 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 is becomes dormant.

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 fulfils the required conditions.

  • A company can be incorporated to hold assets & intellectual properties as a dormant Company.
  • In dormant company, there should not be transactions other than 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 fulfil the requirements of this Act or any other law.
  • Allotment of shares to fulfil the requirements of this Act.
  • Payments for maintenance of company's office and records.
  • Any company including companies registered under Companies Act 1956 can make application in Form No MSC-1 to the respective registrar of the companies.
  • ROC can also SuoMoto convert a company into a dormant company if it is not filing the annual account from last 2 years or more.
  • Criteria of minimum number of Members or Director should be fulfilled by the dormant company as a Public, Private or One Person Company.
  • If Company has not filed financial statements and annual returns during the last two financial years it cannot apply for a dormant company.

ELIGIBILITY CRITERION

If 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 any business or operations since its incorporation (more than one year)

DISQUALIFYING CRITERION

  • Any inspection, inquiry or investigation has been ordered or taken up or carried out;
  • Any prosecution has been initiated or pending under any law;
  • Company has any outstanding loan. If there is any, then concurrence of the lender has to be obtained and enclosed with the application;
  • There is any dispute in management or ownership of the company;
  • Company has any outstanding statutory taxes, dues or duties etc. payable to central or state government or any local authorities;
  • Company has defaulted in the payment of workmen's dues;
  • Securities of the company are listed on any stock exchange within or outside India.
  • The application has been made with an objective to deceive the creditors or to defraud any other person.

ADVANTAGES OF DORMANT COMPANY

Some of the Advantages of 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 future project or hold 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 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.

      WHAT ARE THE BASIC COMPLIANCES FOR DORMANT COMPANY?

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