When a Company is formed for any future project or to hold intellectual property or an asset and has no any significant accounting transaction, such company may apply for obtaining the status of Dormant Company. An OPC or Private Limited Company or Limited Company may apply for Dormant Company status and avail certain exemptions from Mandatory Compliances.
The provisions regarding Dormant Company has been given in Section 455 of Companies Act, 2013 read with Rule 3 to 8 of Companies (Miscellaneous) Rules, 2014 under Chapter XXIX. The Act prescribed lesser compliances for dormant companies in these provisions and rules.
Status of Dormant Company:
1. May by itself obtain the status of dormant company by making application to Registrar in e-form MSC-1, OR
2. The registrar shall issue a notice to the Company if it has not filed Financial statements/ Annual returns for 2 consecutive Financial Years and enter the name of such Company in the register maintained for dormant Companies.
A. Application for obtaining status of dormant Company by the Company:
Who can apply: Where a company is formed for any future project or to hold an asset or intellectual property and has no any significant accounting transactions or an inactive company.
Procedure: Such Company may make application in e- form MSC-1 after passing a Special Resolution in General meeting or issuing a notice to all the shareholders for this purpose and obtaining consent of atleast 3/4th (in value) of shareholders.
Eligibility: Such Company shall eligible to apply for obtaining the status of Dormant Company if following 8 conditions are satisfied:
(i) No inspection, inquiry or investigation has been ordered/taken up/carried against the company.
(ii) No prosecution has been initiated/pending against the company under any law.
(iii) The company has neither any outstanding public deposits nor it is in default in payment thereof and interest thereon.
(iv) The company have not any outstanding loan whether secured or unsecured. Provided if any outstanding loan exist, the company can apply after obtaining a lender's approval and enclosing the same with form MSC-1.
(v) There is no dispute in management/ ownership of company and a certificate in this regard is enclosed with form MSC-1.
(vi) The company does not have any outstanding statutory dues, taxes, duties etc. payable to any CG or SG or any local authorities etc.
(vii) The company has not defaulted in payment of workmen dues.
(viii) The Security of any company is not listed on any stock exchange within or outside India.
Therefore, a listed Company cannot make the application under this section.
The Registrar after considering an application, shall allow the status of Dormant Company to the applicant in form MSC-2.
B. Register of Dormant Companies:
The register maintained under the portal maintained by MCA on its website www.mca.gov.in or any other website notified by CG, shall be the register of dormant companies.
C. Minimum No. of Directors:
The dormant company shall maintain minimum no. of directors, i.e. 3 in case of public company, 2 in case of private company and 1 in case of OPC.
D. Return of Dormant Companies:
To maintain the status of dormant company, the company shall file 'Return of Dormant Company” annually indicating its Financial Position duly audited by Chartered Accountant in Practice in e-form MSC-3 within 30 days from the end of each Financial Year.
Also, the Company shall continue to file the return of allotment (e-form PAS-3) and change in directors (e-form DIR-12) in the manner and within the time as specified under the Act.
Dormant companies are out of the 20 Companies audit ceiling limit applicable to auditor and provisions of the act in relation to rotation of auditors shall not apply to dormant companies.
E. Number of Board Meetings:
A dormant company is required to conduct atleast 1 Board Meeting in each half of a Calendar year and the gap between two meetings is not less than 90 days.
F. Benefits of having Dormant Status:
• To revive and operate a company you intend to use in future.
• To protect your interest and reputation as a sole trader.
• To hold a fixed asset such as a property.
• Less compliance.
G. Application for seeking status of Active Company:
The application shall be made in e-form MSC-4 along with return in e-form MSC-3 in respect of the Financial Year in respect of the Financial Year in which application for obtaining the status of active company is being filed.
Provided the 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.
The Registrar after considering application shall issue the certificate in form MSC-5 allowing the status of Active Company to the applicant.
Where a dormant company does or omits to do any act mentioned in the grounds of application in e-form MSC-1, affecting its status of dormant company, the director shall file an application for obtaining the status of active company within 7 days from such event.
Where the registrar has reasonable cause to believe that any company registered as dormant company has been functioning in any manner, he may initiate the proceedings of enquiry under section 206 of the Act. If after giving reasonable opportunity of being heard, it is found that the company has actually been functioning, the registrar may remove the name of such company from the register of dormant companies and treat it as an active company.
Here, 'Significant Accounting Transactions' means transactions other than:
(a) Payment of fees to the registrar,
(b) Payment 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.
Tags :Corporate Law