Registration as Dormant Company

The Companies Act, 2013 (the Act) introduced the concept of a Dormant Company, whereby a Company that has been incorporated, 

• but presently has no operations or
• has to wait for its operations to start or 
• has finished a project and has presently no operations, 

can seek to register as a Dormant Company with the Registrar of Companies of the state where its registered office is situated. That is, the Company foresees that in future it may want to undertake a fresh project or its operations may resume. In such a situation, the Company can opt for Active status by filing an application to remove Dormant status.

Who can apply for dormant status

Section 455 of the Companies act, 2013 very clearly states that: 

A company that 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 the way prescribed to obtain ‘dormant’ status.

For the purposes of section 455 of the Act:

1. "Inactive company" refers to a company that has in the last 2 financial years:

• not been conducting any business or operations, or
• made any significant accounting transactions, or 
• Not filed its financial statements (AOC-4) and annual return (MGT-7/7A)

1. "Significant accounting transaction" means any transaction other than:

• fees paid to the MCA by the company;
• Fees or payments made by the company to comply with the provisions/ orders/ requirements of this Act or any other applicable law;
• Issue and allotment of shares to complete the requirements of this Act; and
• payments for the maintenance of its registered office and/or other offices and books and records.

Pre-conditions for obtaining status of Dormant Company

1. A company can apply for the status or registration as a Dormant Company only if the following conditions are met:
2. The Company has no inspection, inquiry, or investigation ordered, initiated, or conducted against it.
3. The Company has no prosecution pending against it under any law.
4. The company has no outstanding public deposits nor has made any defaults in repayment of such deposits or interest thereupon.
5. The company has no outstanding loans, be it secured or unsecured. In case it has outstanding unsecured loans, the company may apply under this rule only after obtaining consent from the unsecured lender.
6. The Company has no disputes regarding the management or ownership of the company.
7. The Company has NIL outstanding statutory taxes, dues, duties, etc., payable to any Government, and / or local authorities.
8. The Company has not defaulted in the payment of dues to its workers/ employees.
9. The Company is unlisted, i.e none of its securities are listed on any stock exchange, in India or outside India.

Process for application as a Dormant Company

The Company has to file Form MSC-1 (preview of the form appended at the end of this write up) with requisite Fees. 

This application should be made after- 

Either after a special resolution has been passed in a general meeting of the company i.e. a special resolution, or 

by taking consent from at least 3/4th of the shareholders after issuing a notice to all shareholders (in value). This consent is actually in the form of a letter taken from each shareholder who is willing to give the consent and is in the following format:

Consent by Shareholder for Dormant status

[Pursuant to section 455 of the Companies Act, 2013]

Date: «Date_of_Consent_from_shhs»

To,

The Board of Director    

«Company_Name»

«Co_RO_Add»

I, «Shh_1», «son_daughter_Shh_1» of «Father_Name_Shh_1», residing at «Address_Shh_1_», holding «Shhg_Shh_1_» equity shares  of Rs «FV_per_Share»/- each being «Shhg_percent_Shh_1»% of the paid up share capital of the Company, in my own name, hereby give consent, pursuant to Section 455 and any other applicable provisions of the Companies Act, 2013 and the rules made there under (including any statutory modification(s) or re-enactment thereof for the time being in force), for applying for dorman status for the Company with the Registrar of Companies, «Place_of _ROC». 

Signature:…………………………………….

Name:   «Shh_1»

The Schedule of Fees is as follows

There are no application fees to be paid when applying for dormant status. Once the form is approved by the MCA, then annual fees for maintaining the status are applicable. 

Annual Fee payable by a dormant company 

This is based on the authorised capital of the company and whether they are an OPC or small Company

Fees payable by companies other than OPCs or Small Company(ies)

Fees payable by OPCs or Small Company(ies)

Certificate of status of dormant company

Once MSC-1 has been filed, the Registrar will change the status of the Company in the CMD (Company Master Data) to that of ‘dormant’ and a certificate in the format of form MSC-2 (appended at the end of this writeup) will be issued. 

The Registrar has to maintain the Register of dormant companies, in a specified format. Presently, this is being maintained online, on the portal of the Ministry of Corporate Affairs: www.mca.gov.in 

Suo-moto decision of the Registrar of Companies

At times, when the company is not operating/ functioning, and it has not applied for the dormant status, the ROC (Registrar of Companies) has the power to include the name of such a Company in the Register of Dormant Companies it maintains.

The company is not functioning- this is triggered when for two consecutive financial years, the company has not filed its financial statements (AOC-4) and/or annual returns (MGT 7/7A). 

The Registrar has to first issue a Notice to the Company, and give it an opportunity to explain the non-filing of the forms etc. Thereafter, it can take the decision to include/ not include the name of the company in the dormant register.

Compliances to be followed for Registration as a Dormant Company

Even though the company has applied for dormant status, it does not mean that the company has no further obligations. It has to: 

• Maintain the minimum number of directors throughout the dormant status of the Company, 2 in case of private and 3 in case of public company.
• Filing of Forms PAS-3 or DIR-12: If there is an allotment of securities or any changes in the board of directors, PAS-3 or DIR-12 should be filed within the due time.
• Holding of Board Meetings: hold at least two meetings of the Board, every financial year, with a minimum gap of 90 days between each meeting, till the time the Company has the dormant status. Generally a company has to hold 4 meetings in a year. 
• File the Return of Dormant Company: Annually, the dormant company will file the "Return of Dormant Company" with the Registrar. This return gives the information, among other things, the audited financial results of the company signed by a Practicing Chartered Accountant. The return is filed in Form MSC-3 alongwith the requisite fees, within thirty days from the end of each financial year i.e. by 30th April if 31st March is the end of the financial year. 

Maximum Dormant Status of 5 Years

Section 455 of the Companies Act, 2013 says that a dormant company can retain its dormant status for a maximum period of five consecutive years. Failure of the dormant company to re-apply for active status within this period of 5 years may start the proceedings of removal of the company's name as a registered entity. 

Thus, a Company may apply for dormant status multiple times, but one term of such status should not be for more than 5 consecutive years.

Application for making a Dormant Company Active again

The Company which had applied for dormant status and has been so for the last few years ( but not exceeding a total of 5 years) can apply before the expiry of 5 years (from date of taking dormant status) to become an Active company again. 

The Company has to make an application in Form MSC-4 (format appended at the end of this write up), along with all the necessary documents and fees as prescribed (presently, the fees prescribed is NIL). Please refer to the table as given above.

In addition, the form MSC-4 should be accompanied with Form MSC-3, which relates to the financial year for which the application is being filed to obtain the Active company status.

FAQs

• Can a company that has ‘dormant’ status, continue like this for any number of years?

No. Once a company has received  dormant status, it can be a dormant company for a maximum of five consecutive years. 

• What happens if a company does not apply for active status within such 5 years?

If such a dormant company does not file the application for getting an Active status within 5 years from the date of it being a dormant company, then the Registrar takes action the provisions of section 248 of the Companies Act, 2013 and starts the process for strike off of the name of the Company from the Register of Companies.

• If under garb of Dormant status, the company is operating- - say it receives some funds etc?

If the Registrar of Companies (ROC) has reasonable basis to believe that a company which is presently having the of a dormant company but is actually functioning or operating in any manner, directly or indirectly, then the ROC may initiate an inquiry under section 206 of the Act. 

Such a dormant company has to be given an opportunity to present its case and even after this, if its is proven that the Company has been operating, then ROC can change the status of such a company from ‘Dormant’ to ‘Active’. 

If a company has only received funds which were due to outstanding debts when the company was functioning 

• What happens to a Company who has a dormant status, but is still functioning?

If a dormant company starts operating or functioning even when it is registered as a dormant company then under the provisions of section 455 of the Companies Act, 2013, the Registrar will remove the name of such a dormant company from the Register of Dormant companies and make the status of the Company- Active.

• What type of a Form is MSC-4? 

The Form MSC-4 is a non STP (Straight Through Process) form, i.e. it will not be approved automatically by the MCA portal. Rather the Registrar will review the form and application submitted therein, and on being satisfied with the parameters as stated in section 455 read with the rules, the Registrar will approve the form and issue a certificate in Form MSC-5 (format appended at the end of this write up), granting the status of Active to the Company which presently is a Dormant company.

Further, if a dormant company performs or fails to perform any act mentioned in the grounds of application specified in Form MSC-1, which was submitted to the Registrar to obtain the dormant company status, and such act affects its dormant company status, the directors must submit an application within seven days of such event. This application should be made in accordance with sub-rule (1) of this rule to obtain the active company status.