How to convert a dormant company into active company?

Introduction

After the five consecutive years have been completed by a dormant company, where a company wishes to activate its coming to usual then, a process is to be followed in order to convert a dormant company into active company.

This article is inclusive of benefits provided to the dormant company, the legal framework along with the procedure to obtain the status of an active company from being a dormant company.

Benefits/ exemptions provided to dormant company

Here are the benefits or you can say exemptions that every company is eligible to enjoy, namely:-

1. Dormant company shall hold only two board meetings in a year with a gap of 90 days in between the two company.
2. Dormant company is not required to include the statement of cash flow in its financial statement.
3. The provisions of rotation of auditors is not applicable in case of the dormant company.
4. Dormant companies enjoys the advantages of lower statutory compliance cost as there are few statutory compliances applicable to dormant company as compared to active company.
5. Dormant status is an advantages to promoters who want to hold an intellectual property or an asset under the corporate shield for its usage at a later stage.
6. Companies can enjoy the status of dormant company for a period of 5 consecutive years.

Legal Framework seeking the status of active company from dormant company

Section 455 of the Companies Act lays down the provisions required to be followed for seeking the status of an active company from dormant company. An application for obtaining the status of an active company from dormant company is required to be made before the end of five consecutive years from the date of becoming a dormant company.

If by any chance the application for obtaining the status of an active company from dormant is not made before the end of five consecutive years from the date of becoming a dormant company, then the name of the company is struck off from the register of companies maintained by the Registrar of companies.

To rectify the contravention, such a company should within seven days of such contravention

Procedure to obtain the status of an Active Company from dormant

Here is the process given in a simplified manner to know how to convert a dormant company into active company.

The dormant company shall follow the process to obtain the status of an active company on its own:-

1. An application for obtaining the status of an active company is required to be made in Form MSC-4 along with the fees as provided in the Companies (Registration Offices and Fees) which must be accompanied by a return in Form MSC-3 in respect of a financial year in which the application for obtaining the status of an active company is being filed.
2. The Registrar after considering the application filed for obtaining the status of active company from dormant company, shall then grant a certificate in Form MSC-5 allowing the status of an active company to the applicant.

The Registrar of Companies shall in the following cases shall convert a dormant company into active company:-

1. Where a dormant company does or omits to do any act mentioned in the grounds in the application made for obtaining status of dormant company and such act or omission affects the status of dormant company, the directors of such company is required to file an application within seven days from such event for obtaining the status of an active company.
2. Where the Registrar has reasonable cause to believe that any company registered as “dormant company” under his jurisdiction has been functioning in an any manner, directly or indirectly affecting the status of dormant company, Registrar can initiate the proceedings for enquiry under section 206 of the Companies Act 2013 and if, after giving a reasonable opportunity of being heard to the company in this regard, it is found that the company has actually been functioning, the Registrar can remove the name of such company from register of dormant companies and treat it as an active company.

Conclusion

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