Where 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.
1. “Inactive Company” means a company that 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” means any transaction other than—
- Payment of fees by a company to the Registrar;
- Payments made by it to fulfill the requirements of this Act or any other law;
- Allotment of shares to fulfill the requirements of this Act; and
- Payments for maintenance of its office and records.
Prior Conditions for Dormant Status:
- The company should not have been carrying on any business or operation, or 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.
- In case there is any unsecured loan in the Company then the consent of the lender should be obtained.
- Statement of Assets and Liabilities should be obtained from Statutory Auditors of the Company.
- No dispute certificate should be obtained from the management or promoters of the Company.
- No inspection, inquiry, or investigation has been ordered or taken up, or carried out against the company
- No prosecution has been initiated and pending against the company under any law;
- The company is neither having any public deposits which are outstanding nor the company is in default in payment thereof or interest thereon;
- 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.;
- The Company has not defaulted in the payment of workmen’s dues;
- the securities of the company are not listed on any stock exchange within or outside India.
How to obtain the Status of the Dormant Company?
1. A Company in its general meeting is required to pass a special resolution with the consent of at least ¾th of the majority in value.
2. After satisfying the conditions mentioned in section 455 and rules 3 and 6, the company may apply for obtaining the status (Certificate) of the dormant company. The application to obtain dormant status shall be filed with the Registrar in Form MSC-1.
3. The registrar after being satisfied shall provide the certificate in Form MSC-2 allowing the status of a Dormant Company to the applicant.
1. The company needs not to file two (2) forms for Annual filing i.e.; MGT- 7 and AOC-4 each year.
However, Annual Return in Form MSC-3 has to be filed within a period of thirty days from the end of each financial year in the case of Dormant companies as well.
2. No requirement to hold Annual General Meeting every year;
3. No need to hold and convene four (4) Board Meetings in a year, etc.
Dormant Company shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days. (i.e. total two board meetings instead of four board meetings)
4. Minimum number of Directors: The Dormant Company shall maintain minimum no. of Directors, i.e. 3 in case of a public company, 2 in case of a private company, and 1 in case of One Person Company (OPC).
5. Other Compliances: Further, the Company also needs to file requisite returns under Income Tax Act, 1961 and Goods and Services Tax, 2017.
Most of the compliances under the Companies Act, 2013 are event-based and all such compliances, if applicable, are to be fulfilled at regular intervals by dormant companies.
Tenure: Registrar shall initiate the process of striking off the name of the Company if the company remains as a dormant company for a period of consecutive 5 years.
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