Dormant Status for Company

Pooja | Last updated: 11 December 2021

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Quick Summary

A Dormant Company, as introduced by the Companies Act 2013, allows businesses to maintain their corporate status without active operations. This is ideal for holding assets or intellectual property for future use, offering a cost-effective alternative to company closure. Key benefits include reduced compliance, name reservation, and protection of interests, with specific conditions and procedures for application and maintenance.

INTRODUCTION The Companies act 2013 has introduced new provision called Dormant Company. This concept is also known by profession as Asset Shielding Concept. A Dormant Company lies on the core foundation of invest now and shine later. The concept of Dormant is inspired by the common phenomenon

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FAQ :

A Dormant Company is a company registered under the Companies Act 2013 for a future project or to hold an asset or intellectual property, which has no significant accounting transactions.

A company formed and registered under the Companies Act 2013 for a future project or to hold an asset/intellectual property, with no significant accounting transactions, can apply. Newly incorporated companies that haven't started business activities and 'inactive companies' can also apply.

Benefits include reserving a company name, holding intellectual property, reducing compliance costs and requirements (like fewer board meetings and no annual filings of MGT-7 and AOC-4), and avoiding re-incorporation costs if the business is reactivated.

Before applying, the company must have no pending inspections, inquiries, investigations, or prosecutions. There should be no outstanding public deposits, interests, or loans (unless lender consent is obtained), and no outstanding tax dues or workmen's dues. Listed companies cannot apply.

Dormant companies can maintain this status for a consecutive period of 5 years. After this period, the Registrar will initiate the process of striking off the company's name unless it's converted back to an active company.

To convert back to an active company, an application must be prepared and filed in Form MSC-4, accompanied by a return in Form MSC-3 for the relevant financial year. The Registrar will then issue a Certificate in Form MSC-5 confirming the active status.