Introduction
Just like every person living on this planet is living with a status, similarly, companies also have a status. Thus, on the basis of its status, companies may be classified into active, dormant, under liquidation, under the process of striking off, strike off, dissolved, or amalgamated.
In this article we will be learning about “what is dormant company in company law?”. So, let’s get started.
What do you mean by dormant company?
Section 455 of the Companies Act 2013 describes the definition of a dormant company. The definition is as follows:-
(1) Where a company 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 in Form No. MSC 1 for obtaining the status of a dormant company.
*inactive company – means a company that has not been carrying on any business or operation, or has not made any *significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years;
*significant accounting transaction” means any transaction other than—
(a) payment of fees by a company to the Registrar;
(b) payments made by it to fulfil the requirements of this Act or any other law;
(c) allotment of shares to fulfil the requirements of this Act; and
(d) payments for maintenance of its office and records
(2) The Registrar on consideration of the application shall allow the status of a dormant company to the applicant and issue a certificate in Form No. MSC 2 to that effect.
(3) The Registrar shall maintain a register of dormant company
(4) In case of a company which has not filed financial statements or annual returns for two financial years consecutively, the Registrar shall issue a notice to that company and enter the name of such company in the register maintained for dormant companies.
(5) A dormant company is expected to have minimum number of directors, file Form No. MSC 3 and pay annual fee to Registrar to retain its dormant status in the register and may become an active company on an application made in this behalf accompanied by other documents.
(6) The Registrar shall strike off the name of a dormant company from the register of dormant companies, that fails to comply with the requirement of this section.
How to apply for obtaining a dormant status of the company?
Here are some of the steps that are required to follow as it’s the legal procedure. Doing so will help you obtain the status of a dormant company.
Therefore, a company can obtain the status as “Dormant” either by suo moto or ROC may declare it to be.
Suo-Moto Application :- A company can apply to the Registrar of Companies (ROC) for the status of a dormant company in Form No. MSC-1 along with such fee as provided in the company law.
Declared Dormant by ROC :- Where a company has not filed its financial statements or annual returns for two years consecutively, the Registrar may issue a notice to such company and enter the name of such company in the register maintained for dormant companies.
So, its not always that the company is given the authority to apply for it being dormant but also, the Registrar being the higher authority is also entitled to call for it. Also, the Registrar may initiate the process of striking off the name of the company if the company remains as a dormant company for a period of consecutive five years.
How long can a company stay dormant?
Section 455 of the Companies Act 2013 states, the maximum period for which the company can be in dormant status if five consecutive years. A company cannot be in dormant status for more than five years. Thus, before the completion of five years being dormant, the company shall apply either for activation or strike-off.
However, where a company fails to comply with the law, the Registrar can strike off the name of a dormant company from the register of dormant companies.
Procedure to obtain the status of Dormant Company
In the article of “what is a dormant company in company law”, the procedure to obtain the status of dormant company plays an important role. So, here is the procedure required to be followed, namely:-
Step 1: The company shall be required to call for a board meeting. In the board meeting conducted, the day, date, time and venue for the General Meeting of the members of the company shall be fixed. And along with it, a resolution shall be passed for making to the ROC to obtain the status of the dormant company.
Step 2: The company will obtain statement of affairs from the Auditor of the company. The statement of affairs shall give the financial position of the company at the time of passing a resolution in the shareholder’s meeting.
Step 3: The company shall hold the General Meeting at the appointed time, place and date as per the notice calling the meeting and also pass a special resolution.
Step 4: Special resolution is necessary to pass so as to obtain the status of dormant company and also at the same time, authorize the director(s) to make an application to ROC or after issuing a notice to all the shareholder of the company and acquire the consent of at least 3/4th shareholders.
When the status of “Dormant Company” shall not be granted by ROC?
So, as per the provision given under the law, the registrar shall not grant the status of a dormant company, if :
- any inspection, inquiry or investigation has been ordered or taken up or carries out against the company;
- any prosecution has been initiated and pending against the company under any law;
- there are public deposits that are outstanding or the company is in default in payment thereof or interest thereon;
- there are outstanding loans, whether secured or unsecured.
- The company is not having any outstanding loans, whether secured or unsecured. But if company has any outstanding unsecured loan than the company may apply for the status of Dormant only after obtaining NOC from the lender. Such NOC is required to be attached in the Form filed with ROC.
- There are outstanding statutory taxes, duties, etc payable
- There is a default in payment of its workmen’s dues
- The company is a listed company
In all of these case, as mentioned above, ROC shall be granting the company wishing to become dormant, the status of “Dormant Company.”
Conclusion
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