Dormant Company Registration

Dormant Company Registration

For availing specific exemptions from obligatory compliance, registration of a Limited Company or Private Limited Company or One Person Company as a dormant company is necessitated. This is done with a purpose to acquire an asset or intellectual property without any significant accounting transactions by the registered companies.

This article provides detailed information about the registration as a dormant company and its benefits.

Dormant Company

As per the Companies Act, 2013, a dormant company is an inactive company which has not been indulged in any business and does not have any ‘significant accounting transactions’ and the company is not indulged in filing annual return in the last two financial years.

  • Inactive company refers to the company not indulging or operating in any type of business or has not recorded any financial statements and annual returns in the last two financial years.
  • Significant accounting transactions refer to the transactions excluding fees paid to the Registrar by a company, payments for the accomplishment of this Act or any other law, shares allotment for this Act and payments for maintaining office and records.

Benefits of dormant company status

The annual return for the company can be filed after the company has been registered as a dormant company. This can be done using a simple form i.e. MSC-3. The Board Meetings conducted by the company and the burden of compliance is reduced after getting this status.

Eligibility criteria

For registering a company, the following criteria are to be satisfied for the eligibility:

  • The company should be free of any inspection or inquiry.
  • The company should not have any prosecution initiated or pending.
  • The company should not have any outstanding public deposits and any payment or interest default.
  • No outstanding loan (secured or unsecured) should be there with the company. If there are such loans, the company after acquiring accompaniment of the lender can imply this rule attached with Form MSC-1.
  • A certificate is submitted along with the Form MSC-1 stating that there is no conflict or dispute in the management or the company’s ownership.
  • There must be no default in workmen’s payment by the company
  • No outstanding statutory taxes, duties, dues, etc. to be paid by the company to the Central Government or any State Government should be there.
  • Any stock exchange in the country or outside the country should not be listed in the securities of the company.

Registration process

The process for registering a company is given below:

  • Board Resolution

Board General Meeting should be conducted for passing a special resolution for the enactment of the registration. Notice to all the shareholders for the same can be sent to attain the consent of at least 75% or 3/4th of the shareholders.

  • Form MSC-1- Filing

After the approval of the Board resolution or the shareholders, the company can file the Form MSC-1 along with the payment of the specified fee for the registration.

  • Dormant company certificate

A certificate will be allotted for granting the status of the dormant company by the Registrar in MSC-2 after the verification of the application.

  • Dormant company status maintenance

A Return of Dormant company is required to file using Form MSC-3 with the Ministry of Corporate every year before 30th April. It consists of the details of the company’s financial status and is audited by a Chartered Accountant.

  • Switching to an active company

An application has to be submitted to the Registrar in the Form MSC-4 for switching the status of the company to Active Company. After the verification of the application, the registrar will issue MSC-5 for restoring the company’s status.

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