In certain circumstances, a company can change its status from Active to Dormant.
As per Companies act 2013, a dormant company is one that has no significant accounting transactions in the last two financial years or annual returns and financial statements for last two years has not been filed with ROC. These types of companies are considered as inactive.
If dormant company wants to carry on any business activities then it need to apply to the registrar of companies to change the status to active. ROC if satisfied, forfeit the dormant status and consider it as active.
In this article we will be discussing how a company can apply and get the status as dormant.
Status dormant can be obtained for all type of companies. This means, private limited companies, public limited companies and One Person Companies can apply and get the status of dormant.
Here are certain situations when promoters or shareholders generally decide to keep company’s status as dormant.
- Reserving company name for later use
- To protect brand name or trademark
- On illness or death of a business owners
What type of Companies can apply for status Dormant?
As per Section 455 of Companies Act 2013, 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 in such manner as may be prescribed for obtaining the status of a dormant company.
Inactive means the company 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.
“Significant accounting transaction” is defined to mean any transaction other than—
- Payment of fees 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.
Conditions are to be fulfilled before applying for dormant status
A company shall not be eligible to apply for change in status to dormant if following conditions are not fulfilled;
- No inspection, inquiry, or investigation has been ordered or taken up against the company or no prosecution has been initiated against the company and pending under any court;
- It does not have any public deposits or interest thereon outstanding for payment;
- There is no outstanding loan, secured or unsecured. If there are unsecured loans then consent of the lender should be obtained and enclosed along with the form;
- There should be no dispute or difference among the management or promoters and a certificate to that effect is enclosed;
- The company does not have any outstanding tax dues either to central or state government or local authorities and has not defaulted in payment of its workmen’s dues;
- It’s not a listed in stock exchange
Step by Step Procedure to get status as dormant
Step 1: Call for a board meeting to;
- call extra ordinary general meeting,
- authorize a director to make application for status dormant with ROC,
- Issue notice of general meeting,
- engage a chartered accountant or auditor to issue certificate
Step 2: Hold extra ordinary general meeting and pass special resolution. File certified true copy of special resolution and notice of extra ordinary general meeting with explanatory statement as an attachment to form MGT-14 with ROC.
Step 3: Company has to make an application in form MSC-1 with following attachments for obtaining status of a dormant company;
- Certified true copy of the board resolution
- Certified true copy of the special resolution
- Auditor’s certificate
- Statement of affairs duly approved by chartered accountant or auditor
- Latest Financial Statement and Annual Return are mandatory to attach In Case the Same Is Filed to Registrar.
- Certificate regarding no dispute in the management or ownership
- Consent of lender, if any loan is outstanding.
MSC-1 will be auto approved in STP. After getting approval, an email will be sent to the registered email ID with the status of the application.
Company status on the portal of the Ministry Of Corporate Affairs would be shown as ‘dormant’.
A system generated certificate in form MSC-2 will be issued with status dormant by the ROC to the registered email ID as an attachment.
The ROC maintains registrar of dormant companies. You can check your company master data to know the status.
Fees to be paid while filing for status dormant
|Application made by a company having authorized share capital of||For other than OPC & Small company (Amount in Rupees)||OPC & Small company (Amount in Rupees)|
|Up to Rupees 25, 00,000||2, 000||1, 000|
|Above Rupees 25, 00,000 but up to Rs 50, 00,000||5, 000||5, 000|
|Above Rupees 50, 00,000 but up to Rs 5, 00, 00, 000||10, 000||Not Applicable|
|Above Rupees 5 Crore but up to Rupees 10 Crore||15, 000||Not Applicable|
|Above Rupees 10 crore||20, 000||Not Applicable|
|A company limited by guarantee but not having a share capital||2, 000||Not Applicable|
Powers of ROC
If the dormant company fails to comply with the requirements of section 455 of Companies act 2015 then the registrar shall have the power to strike off its name.
The ROC shall initiate the process of striking off the name of the company if it remains as dormant for a period of 5 consecutive years.
ROC can issue notice to companies which has not filed financial statements or annual returns for two financial years consecutively and enter the name of such company in the registrar maintained for dormant companies.
ROC also has power to strike off the name of a dormant company from the registrar if it fails to comply with the requirements of section 455 of Companies Act 2013.
If the dormant company wants to continue the status as ‘dormant’ for a longer period then its advised that first it’s status has to be changed to active before the expiry of 5 years term and then fresh application can be filed with Registrar to go dormant for another 5 years.