Status of a company can be of 3 types: Active, Inactive, and Dormant Companies (New Concept under Companies Act, 2013).
Here we are about to discuss regarding the Dormant Companies. As per the dictionary, Dormant means alive but not actively growing. Two types of companies can apply for this dormant status under Section 455 of Companies Act, 2013:
- Inactive Companies
- A company formed under Companies Act, 2013 for a future project or to hold an asset or intellectual property and has no significant accounting transaction.
Proviso to Rule 8 of the Companies (Miscellaneous) Rules, 2014 says that a dormant company cannot remain as a dormant company for more than 5 consecutive financial years. If it remains so, then the Registrar shall commence the process of striking off the name of the company from the Records. In other words maximum tenure of a DORMANT COMPANY is 5 years.
Before applying for the status of a Dormant Company, some conditions are to be followed:
- No inspection, Inquiry or Investigation, taken up or ordered against the company;
- No outstanding public deposits or defaults in payments thereof and interest thereon;
- The company has not defaulted in the payment of workmen’s dues;
- No listing of Securities of Company within or outside India;
- The company is not having any outstanding loan, whether Secured and Unsecured;
NOTE: In case company having Unsecured Loan, It may apply for status of DORMANT only after obtaining NOC from the lender (to be attached with the form MSC-1 to be filled with the ROC);
- No prosecution has been initiated or pending against the company under any law;
- No outstanding statutory taxes, dues, duties etc either to central or state government or local authorities;
- Intimation of the same to be given to the creditors of the Company;
- No Dispute in the Management or Ownership of The Company (certificate for the same required required to be attached in the Form which require to file with ROC.
PROCEDURE FOR GETTING THE DORMANT STATUS
- First of all, a Board Meeting is to be called whereby :
- Fixing time and date of EGM,
- Engaging Auditor/CA to issue certificate.
- Secondly, hold the EGM whereby:
- Pass the special resolution and file MGT-14 along with Copy of S/R and Notice of EGM with the Explanatory Statement with the ROC;
- Authorize a director for filing the application for DORMANT with the ROC;
- Lastly, file the Form MSC-1 With the ROC along with Fees as prescribed under Companies (Registration Offices and Fees) Rules, 2014and also with following attachments:
- CTC of BR & SR
- Auditor Certificate
- Statement of Affairs duly certified by Chartered Accountant or Auditor(s) of the company.
- Latest Financial Statement and Annual Return of the Company is mandatory as an attachment in Case the Same are filed with Registrar.
- Certificate regarding no dispute in the management or ownership
- Consent of lender, if any loan is outstanding
After the auto-approval of E-form, a certificate in Form MSC-2 is issued by the registrar and sent to the user as attachment to email after which the status gets changed to DORMANT COMPANY.
RETURNS OF DORMANT COMPANIES
Filing Returns annually, interalia, indicating financial position duly audited by a chartered accountant in practice in Form MSC-3 along with such annual fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 within a period of thirty days from the end of each financial year.
Provided that the company shall continue to file the return (including returns of allotment and change in directors, whenever the company allots any security to any person or there is any change in the directors of the company) to retain its status as DORMANT.
Minimum no. Of Directors in case of:
- Public company-3
- Private company-2
- One person company-1
EXEMPTIONS TO DORMANT COMPANIES
- No need of cash flow statements in their financial statements.
- Holding board meeting in each half of the calendar year with a gap of at-least 90 days. i.e. only two board meetings mandatory during the year.
- Provision relating to the rotation of auditors not applicable.
For getting back the ACTIVE status of a Company, one must file MSC-4 with the ROC.