Dormant Company

The Companies Act 2013 (the Act) via section 455 enables a Company formed and registered for a future project or to hold an asset or intellectual property and having no significant accounting transaction, or an ‘Inactive Company’, to make an application to the Registrar of Companies (ROC) for obtaining the status of a ‘Dormant Company’.

The certificate of a ‘Dormant Company’ (when granted) amongst other benefits (eg.limited liability, separate legal entity etc.) imposes fewer compliance obligations and consequentially lower administrative costs. Further, as and when the circumstances change, such Company can re-apply for ‘active’ status (as detailed below) to start functioning as a non-dormant Company under the Act.

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Application Process for ‘Dormant Company’ Status

The Act read with the Companies (Miscellaneous) Rules 2014 (as amended) etc. prescribe the process for applying for a Dormant Company status, which includes the following —

  • Applicant Company must pass a ‘special resolution’ to such effect in the Company General Meeting or issue a notice to all the Shareholders of the Company for such purpose and obtain consent of at least 3/4th of such Shareholders (in value);
  • An application in eForm MSC-1 along with such fee as provided in the Companies (Registration Offices and Fees) Rules 2014 to the Registrar;
  • The Registrar shall, after considering the application filed in eForm MSC-1, issue a certificate in Form MSC-2 allowing the status of a Dormant Company to the applicant.

Inactive Company

The above said provision explains the meaning and scope of “Inactive Company” as a Company which 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

The said provision explains the meaning of “significant accounting transaction” as any transaction other than —

  • Payment of fees by a Company to the Registrar
  • Payments made by it to fulfil the requirements of the Act or any other law
  • Allotment of Shares to fulfil the requirements of the Act
  • Payments for maintenance of its office and records


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A Company shall be eligible to apply under the above said prescribed Rules for a ‘Dormant Company‘ status only if

  • No inspection, inquiry or investigation has been ordered or taken up or carried out against the Company
  • No prosecution has been initiated and pending against the Company under any law
  • The Company is neither having any public deposits which are outstanding nor the Company is in default in payment thereof or interest thereon
  • The Company is not having any outstanding loan, whether secured or unsecured (provided that if there is any outstanding unsecured loan, the Company may apply under this rule after obtaining concurrence of the lender and enclosing the same with eForm MSC-1)
  • There is no dispute in the management or ownership of the Company and a certificate in this regard is enclosed with eForm MSC-1
  • The Company does not have any outstanding statutory taxes, dues, duties etc. payable to the Central Government or any State Government or local authorities etc.
  • The Company has not defaulted in the payment of workmen’s dues
  • The securities of the Company are not listed on any stock exchange within or outside India


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Minimum number of Directors and Board Meetings

Dormant Companies are required to have have a minimum number of 3 Directors in case of a Public Company, 2 Directors in case of a Private Company and 1 Director in case of a One Person Company (OPC).

Dormant Company would be deemed to have complied with the relevant provision of the Act if at least 1 meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than 90 days.


Non-Applicability of Auditor Rotation

The provisions of the Act in relation to the rotation of auditors shall not apply on Dormant Companies.


MCA Returns of Dormant Companies

A Dormant Company is required to file a “Return of Dormant Companyannually, interalia, indicating financial position duly audited by a Chartered Accountant in practice in eForm MSC-3 along with the prescribed annual fee within a period of 30 days from the end of each financial year.

The ‘Financial Statement’, required to be prepared by Dormant Company, may not include the ‘cash flow statement’.

The concerned Dormant Company shall also be required to continue filing the return(s) of allotment of Securities and change in Directors in the manner and within the time specified in the Act, whenever the company allots any Security to any person or there is any change in the Directors of the said Company.


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An application for obtaining the status of an ‘Active Company’ can be made in eForm MSC-4 along with the prescribed fees and has to be accompanied by a return in eForm MSC-3 in respect of the financial year in which the application for obtaining such status is being filed.

The Registrar shall, after considering the said application filed, issue a certificate in Form MSC-5, allowing the status of an Active Company to the applicant-Dormant Company.


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5 Year Limitation

The Registrar shall initiate the process of striking off the name of the concerned Dormant Company if it remains so for a period of consecutive 5 years.


Name Strike-Off for Non-Compliance

Failure to comply with the requirements of the above said provision of the Act would empower the Registrar to strike-off the name of a Dormant Company from the said Register of Dormant Companies.


Compulsory Application for Active Status

Where a Dormant Company does or omits to do any act mentioned in the grounds of application in eForm MSC-1 submitted to the Registrar for obtaining the status of Dormant Company, affecting such status, the concerned Directors are required to within 7 days of such event, file an application for obtaining the status of an ‘Active‘ Company.


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Notice for Non-Filing of Financial Statement/Annual Returns

In case of a Company which has not filed financial statements or annual returns for 2 financial years consecutively, the said Registrar shall issue a notice to the concerned Company and enter the concerned Company’s name in the Register maintained for Dormant Companies.


Enquiry under Section 206

Where the Registrar has reasonable cause to believe that any company registered as ‘Dormant Company’ under his/her jurisdiction has been ‘functioning‘ in any manner (directly or indirectly), he/she may initiate the proceedings for ‘enquiry‘ under section 206 of the Act.

After giving a reasonable opportunity of being heard to the concerned Company in this regard, if it is found that the said Company has actually been functioning, the Registrar may remove its name from Register of Dormant Companies and treat it as an ‘Active Company‘.


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