Dormant Company is a company which is not carrying on any business or operation. As per Section 455 of the Companies Act, 2013 (“Act”), 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 of Companies for changing it’s status to that of a dormant company.
An inactive company means a company which:
1. has not been carrying on any business or operation, or
2. has not made any significant accounting transaction during the last 2 financial years, or
3. has not filed financial statements and annual returns during the last 2 financial years.
1. The company shall not undergo any inspection, inquiry, or investigation or shall not initiate any prosecution against the company and pending under any court.
2. The company shall not have any public deposits or interest and outstanding for payment.
3. There should be an outstanding loan, secured or unsecured in Company. If there are unsecured loans then the consent of the lender should be obtained and enclosed along with the form.
4. Any dispute or difference between the management and promoters of the company shall not be there and a certificate was issued to give effect is enclosed.
5. The Company shall not have any outstanding tax dues.
6. There shall not be any default in payment of its workmen’s dues;
7. The Company should not be listed company.
What are the benefits and exemptions provided to a dormant company?
Dormant Company gets an advantage of fewer compliances cost as there are only minimal compliances applicable to the dormant company.
Dormant Company is not required to include the statement of cash flow in its financial statement.
Dormant Company shall hold only two board meeting in a year with a gap of 90 days in between the two Companies.
The auditors are not required to be rotated under the dormant company.
What are the Compliances a Dormant Company required to do?
A dormant company shall file a “Return of Dormant Company” annually, duly audited by Chartered accountant n such form along with the fees prescribed under the act.
If a dormant company fails to file an annual return for consecutive two financial years Register may ask to change the status of dormant company.
1. Dormant company tenure is 5 consecutive year. They cannot hold status as a dormant company more than 5 years.
To collect that information which are mandatorily required to dormant status of the Company.
To check whether company is eligible or not to obtain the status of dormant Company
To draft all required documents related to filling application for dormant status.
To prepare Form Mgt-14 and file form with MCA.
After filling of form MGT-14, File Form MCS-1 with the registrar along with the required attachments.
To obtain certificate of dormant status from the department through e-mail confirmation of the application.