{"id":51173,"date":"2022-12-06T12:31:03","date_gmt":"2022-12-06T07:01:03","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=51173"},"modified":"2022-12-06T12:31:04","modified_gmt":"2022-12-06T07:01:04","slug":"dormant-company-under-the-companies-act-2013","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/dormant-company-under-the-companies-act-2013\/","title":{"rendered":"Dormant Company under the Companies Act, 2013"},"content":{"rendered":"\n<p>Section 455 of the Companies Act, 2013 introduced the\nconcept of Dormant Companies under Indian law as the concept of dormant\ncompanies was absent from the erstwhile Companies Act, 1956. Dormant refers to\nthe state of being temporarily inoperative or dormant. A dormant company is one\nwhich has been registered under the Companies Act, 2013 but does not have any \u201c<em>significant\naccounting transaction\u201d<\/em> or is an \u201c<em>inactive company\u201d<\/em> which has been\napplied to Registrar to be declared as a dormant company.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/dormant-company-under-the-companies-act-2013\/#Meaning_of_Dormant_Company\" >Meaning of Dormant Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/dormant-company-under-the-companies-act-2013\/#Requirements_to_Be_Declared_As_a_Dormant_Company\" >Requirements to Be Declared As a Dormant Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/dormant-company-under-the-companies-act-2013\/#Procedure_to_Be_Declared_As_a_Dormant_Company\" >Procedure to Be Declared As a Dormant Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/dormant-company-under-the-companies-act-2013\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Meaning_of_Dormant_Company\"><\/span>Meaning of Dormant Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As defined under Section 455 of the Companies Act,\n2013, This Company is \u201cformed<em> and registered under the Act for a future\nproject\/to hold an asset\/intellectual property &amp; has no significant\naccounting transaction&#8221;<\/em>\/&#8221;<em>an inactive company\u201d <\/em>making an\napplication to the \u201c<em>Registrar in such way as may be prescribed for getting\nthe status of a dormant company&#8221;<\/em>.<\/p>\n\n\n\n<p>Significant Accounting Transaction is defined under\nthe explanation of the same section as:<\/p>\n\n\n\n<p>\u201c<em>any transaction other than-<\/em><\/p>\n\n\n\n<ul><li><em>Payment\nof fees by the Company to the Registrar;<\/em><\/li><li><em>Payment\nmade to it to fulfill the requirements of this Act\/any other law;<\/em><\/li><li><em>Allotment\nof shares to comply with the requirements of this Act &amp; <\/em><\/li><li><em>Payments\nfor maintenance of its office &amp; records.&#8221;<\/em><\/li><\/ul>\n\n\n\n<p>A company that carries out no other transactions except\nthe ones mentioned above shall be considered a dormant company. However, a\ncompany carrying out any other transactions other than the ones mentioned above\nshall lose its dormant status.<\/p>\n\n\n\n<p>An inactive Company is also defined under the\nExplanations of the section. It states that:<\/p>\n\n\n\n<p>\u201c<em>A Company which has not been carrying on any\nbusiness\/operation\/has not made any important accounting transaction during the\npast 2 Financial Years\/has not filed financial statement &amp; annual returns\nduring the past 2 financial years.&#8221;<\/em><\/p>\n\n\n\n<p>Section 455 of the Companies Act 2013 also empowers\nthe Registrar to take suo moto action against a company which has not filed its\nannual returns or financial statements consecutively for two fiscal years. The\nRegistrar shall send a notice to such Company and then enter such Company&#8217;s\nname in the register of dormant companies. The Registrar is also empowered\nunder the Act to strike off the name of companies which do not fulfil the\nrequirements of Section 455 of the Companies Act, 2013 from the register of\ndormant companies. The Registrar is also empowered to strike off the Company&#8217;s\nname, which has been dormant for the last five consecutive fiscal years from\nthe register of the Dormant Company.<\/p>\n\n\n\n<p>A company which has been newly incorporated can also\nbe declared as a dormant company if such a Company has not conducted any\nbusiness since its incorporation but has filed returns with the Registrar of\nCompanies. <\/p>\n\n\n\n<p>There are many benefits which can be derived from a\ncompany (dormant) status. Even though a company is dormant, the name and\ntrademark of the Company still belong to the Company and others are barred from\nusing the same. A dormant company which is formed for a future project shows\nthe intention of the Company to trade and helps reserve and retain the domain\nname. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Requirements_to_Be_Declared_As_a_Dormant_Company\"><\/span>Requirements to Be Declared As a Dormant Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There are certain requirements which a company must\nmeet for it to achieve the status of this Company. These requirements are laid\ndown under the Companies (Miscellaneous) Rules, 2014. The proviso to Rule 3\nlays down the conditions a company is required to fulfil and are as follows:<\/p>\n\n\n\n<ul><li>There\nmust have been no investigation, inquiry or inspection ordered or carried out\nagainst the Company<\/li><li>The\nCompany must not have any secured or unsecured outstanding loan in its name<\/li><li>The\nCompany must not have erred in paying workmen their dues<\/li><li>There\nmust be no prosecution either initiated or pending against the Company under\nany law.<\/li><li>The\nCompany must not have any outstanding public deposits, nor must it have many\nany defaults in the payment of such deposits.<\/li><li>The\nCompany must not have any statutory duties, dues, or taxes which are\noutstanding and payable to the State Government and Central Government or local\nauthorities.<\/li><li>The\nCompany&#8217;s securities must not be listed not any stock exchange either within or\nbeyond India<\/li><li>There\nmust be no dispute regarding the ownership or management of the Company and a\ncertificate in this regard must be submitted along with Form MSC-1<\/li><\/ul>\n\n\n\n<p><strong><em>Rule 6 of the Companies (Miscellaneous) Rules, 2014<\/em><\/strong> states that the dormant Company must have at\nleast 2 directors for a private company, three directors for a public company\nand one in a <strong><a class=\"text-primary\" href=\"https:\/\/corpbiz.io\/one-person-company\">One Person Company<\/a><\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Procedure_to_Be_Declared_As_a_Dormant_Company\"><\/span>Procedure to Be Declared As a Dormant Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A company fulfilling the requirements under Section\n455 of the Companies Act 2013 must follow the steps mentioned below to obtain\nthe status of a company (dormant):<\/p>\n\n\n\n<ul><li>A\nSpecial Resolution (SR) must be passed by a company in its general meeting or\nobtain the consent of at least three-fourths of the shareholders in value after\nduly notifying them.<\/li><li>An\napplication must be filed through Form MSC-1 by the Company to the Ministry of\nCorporate Affairs and pay the requisite fee under the Companies (Registered\nOffices and Fees) Rules, 2014.<\/li><li>Once\nthe Registrar is satisfied with the sufficiency of the application as per the\nrequirements mentioned under Section 455 of the Companies Act, 2013, the\nRegistrar shall issue the certificate to certify the Company as a dormant\nCompany.<\/li><li>The\nRegistrar shall enter the Company&#8217;s name in the register of dormant companies.<\/li><\/ul>\n\n\n\n<p>If, while filing Form MSC-1, the dormant Company fails\nto do any act in accordance with the grounds mentioned under the form, the\ndirectors are under a duty to file an application within seven days of such an\nomission under Rule 8 (1) of the Companies (Miscellaneous) Rules, 2014 to\nobtain the active status.<\/p>\n\n\n\n<p>Once a company has been declared dormant, the company\ncan file an application under Section 455(5) of the Companies Act, 2013 to\nconvert the dormant Company to status of active Company. The application shall\nbe filed through Form MSC-4 along with a return under Form MSC-3 with the\nprescribed fees with respect to the fiscal year for which the active status is\nbeing applied for. If the Registrar is satisfied with the sufficiency of the\napplication, she shall grant the certificate under the Form MSC-5 granting the\nactive status. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The concept of dormant companies was introduced by Section 455 of the Companies Act, 2013 under Indian law. It is a Company which has been incorporated and registered under <strong>the Companies Act, 2013<\/strong><sup><a class=\"text-primary\" href=\"https:\/\/www.mca.gov.in\/Ministry\/pdf\/CompaniesAct2013.pdf\"><strong>[1]<\/strong><\/a><\/sup> but does not have any significant accounting transaction or is an inactive company which has applied to the Registrar to be declared as a dormant company. A company which hasn&#8217;t filed annual returns\/financial statements for two consecutive fiscal years can also be declared as a dormant company by the Registrar\u2019s suo moto action.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read Our Article<\/b>: <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/change-in-status-of-company-from-active-to-dormant\/\">Change in Status of Company From Active to Dormant<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Section 455 of the Companies Act, 2013 introduced the concept of Dormant Companies under Indian law as the concept of dormant companies was absent from the erstwhile Companies Act, 1956. Dormant refers to the state of being temporarily inoperative or dormant. A dormant company is one which has been registered under the Companies Act, 2013 [&hellip;]<\/p>\n","protected":false},"author":47,"featured_media":51174,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[313],"acf":{"service_id":"1"},"authorName":"Sherin Jose","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/11\/MicrosoftTeams-image-4-e1668575330329.jpg","authorDescription":"Sherin has degrees in Law and English Literature from the University of Delhi. She is adept at legal research and writing and enjoys discussing and analysing important legal developments. Her primary interests lie in Corporate, FinTech and IPR Law and she is always on the lookout for exploring new developments in the area. She is an avid reader who loves classics and contemporary fiction. She likes to travel, bake and obsess over cat videos in her free time.","postViews":18451,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/51173"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/47"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=51173"}],"version-history":[{"count":2,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/51173\/revisions"}],"predecessor-version":[{"id":51176,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/51173\/revisions\/51176"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/51174"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=51173"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=51173"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=51173"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}