Dormant Company

Dormant Company

Dormant Status of Company

A dormant company is the one, which has had no significant accounting transactions during the specified accounting period or is an ‘inactive company’. Section 455 of the Companies Act, 2013 recognizes the concept of a dormant company and details the provisions that have been laid down to enable companies to attain the status of a dormant company.

Ground to become a Dormant company

Where a company is formed and registered under this Act for

  • a future project or
  • to hold an asset or intellectual property and
  • has not made any significant accounting transaction, or
  • an inactive company

A dormant company is a great tool for keeping the assets within the company for its future use. A dormant company may be a public company, a private company or a one-person company.

A company cannot remain as a dormant company for perpetuity. The company shall make a decision to either revert to active status within 5 years or the Registrar is empowered to strike off the name of the company from its records.

Inactive company

An inactive company means a company which:

  • has not been carrying on any business or operation, or
  • has not made any significant accounting transaction during the last 2 financial years, or
  • has not filed financial statements and annual returns during the last 2 financial years

Significant Accounting Transaction

Any transaction other than the following shall be construed as Significant Accounting Transaction:

  • payment of fees by a company to the Registrar
  • payments made by it to fulfill the requirements of the Companies Act, 2013 or any other law
  • allotment of shares to fulfill the requirements of the Companies Act, 2013
  • payments for maintenance of its office and records

Transactions that can be carried on by Dormant Company

A dormant company can undertake following business transactions:

 

payment of fees by a company to the Registrar

  • payments made by it to fulfil the requirements of the Companies Act, 2013 or any other law
  • allotment of shares to fulfil the requirements of the Companies Act, 2013
  • payments for maintenance of its office and records
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