Several portions of the sections and rules pertaining to a dormant company are similar to the corresponding UK law. However, certain policies have been framed in a manner to promote better functioning of companies.
The Act specifies that a dormant company is one that:
The first question that most people ask is that – Why incorporate a company only to get a dormant status for it? The primary reason for securing the status of a dormant company is to ensure that the company continues to remain a ‘legal entity’ despite not carrying out business activities.
Here are a few benefits of getting the dormant status:
More on: How to close the Private Limited Company in India?
Under Section 455 of the Companies Act, a dormant company is one that has not been carrying out business or has not made any significant financial transactions or is inactive. To apply for the status of a dormant company an application can be made by the company to the Registrar to request grand of dormant status.
A company that is inactive means:
Non-Significant transactions mean:
Any transactions made beyond this might lead the company to lose the status of a dormant company. A newly incorporated company can also apply for the status of a dormant company if it has not yet started its business activities.
The registrar of companies maintains the record of all dormant companies
Related: How to Register as a Dormant Company?
Below is the process for securing the status of a Dormant Company
A dormant company can convert itself into an active company by filing form MSC – 4 along with returns under MSC – 3. When the registrar is satisfied, a certificate recognizing the active status of the company will be issued under Form MSC-5
Certain conditions are laid downed under the Rule 3 of the Companies (Miscellaneous) Rules 2014:
Under the provisions of the Act, the Registrar can also pass a suo moto action to deem any company as dormant. Also, when a company is dormant for a period of more than five consecutive years, the Registrar can ‘Strike-Off’ the company.
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