Dormant company is a new concept introduced in the Companies Act 2013 which was not there in the earlier Act of 1956. However, the concept is there in the United Kingdom under English Law. Section 455 of the Companies Act 2013 spells out about the dormant company. According to this section, the Dormant Company means inactive or inoperative company.
Get a quote from Kanakkiyal in less than 24 hours.
A company can apply for and become a dormant company, only if the following criterias are satisfied:
The inactive company ” means a company that has not carried on any business or activity, or has not made any significant financial transactions during the past two financial years, or has not completed financial statements and annual returns during the past two financial years.
Step 1. First, you must convene a board meeting to set a time and place for the regular meeting of the members to pass a special resolution (at least 3/4 per value). The director may make a general request for a dormant position with the ROC at this board meeting. You must issue a public meeting notice. Also, you should hire a Chartered Accountant or Auditor to issue a certificate to this general meeting.
Step 2. Next, an extraordinary general meeting takes place. After that, a special decision is passed. An exact copy of the individual’s decision and a notice of the extraordinary public meeting with an explanatory statement. This is because the attachment to the e-form MGT-14 is included in the ROC.
Step 3. Next, the company must apply on the MSC-1 form and attach the following attachments to determine the company’s status:
The immediate question that arises when you understand what a dormant company means is this – why would anyone create a company and register it to declare it dormant? The main purpose of acquiring or maintaining a company’s outstanding position is to enable the company to maintain its corporate status even if it does not do any business.
Intellectual property owned by a dormant company includes a trademark of a company name. The company name is protected so that others are not allowed to trade under the name of the dormant company.
A company may be formed to prepare for a future project. This means the intent of the promoters to trade and therefore to keep the domain name. A good example of this as mentioned in Ramaiya is a company that has acquired a lease but is awaiting further permits before starting a business.
While this is not the most important benefit, by establishing a company that started and later started a business, it can be said to have been well established since its inception even though it may have started its own business later. It helps the company to show a better image to potential customers and / or lenders.
In terms of section 455 of the Companies Act, 2013, a company that has never engaged in any business or has not had a significant transaction may apply to the Registrar for the position of a dormant company. The definition of a provision means “significant accounting transaction” and “an inactive company.”
The relevant section of the provision reads as follows:
“Definition For the purposes of this section,
Therefore, if a company makes any transaction that does not fall within the four headings mentioned above, it is likely to lose its dormant position.
According to renowned author Ramaiya, a newly registered company can apply to a dormant company if it has not done any business or operation since its inception, without submitting tax returns to the Registrar of Companies or other payments complying with the terms of the Company Act or any other law.
How do you find the status of an Unemployed Company?
The steps mentioned below are followed during the granting / finding of dormant:
An existing company that has not had a significant transaction or continued business with any business for the past two years or has not submitted its financial statements or annual returns for the past two financial years / two years shall be deemed to be a non-performing entity for Section 455. -suo fire. The Act also empowers the Registrar to remove a company name from the Register if it remains inactive for five consecutive years. This is in contrast to the UK situation where a company is allowed to remain inactive for an indefinite period of time. However, such a provision could invite trouble and also tend to be misused in the Indian business environment which is slowly moving towards a financially friendly economy.
Term 3 of the Companies Act (Miscellaneous) Regulations 2014 sets out several conditions that a company must meet before it can gain the status of a dormant company.
The conditions set out under these Rules are discussed below.
Another requirement under the Companies Act (Miscellaneous) Regulations 2014, Rule 6 is that a dormant company must have a minimum of 3 directors in the case of a public company, 2 if it is private and one if there is One Private Company.
Click the button and enter your details in the appearing form. We will contact you within 24 hours to schedule a free consultation call and discuss your needs.
Get a quote from Kanakkiyal in less than 24 hours.