January 21, 2019

Procedure for Obtaining Status of Dormant Company:

DORMANT COMPANY:

The companies act, 2013 has recognized a new set of companies called dormant companies. As per section 455(1) where a company is formed and registered under this act for future projects or to hold an assets or intellectual property and has no significance accounting transactions, such a company or an Inactive company may make an application to the registrar in such manner as may be prescribed for obtaining status of dormant company.

Explanation to section 455(1):

i) Inactive company means a company which has not been carrying on business or operation or has not made any Significant Accounting Transactions during the last 2 preceding financial year, or has not filled financial statements and annual returns during the 2 two financial year.

ii) “Significant Accounting Transactions’’ means transactions other than :-

a) Payment of fees by the company to the registrar,
b) Payment made by it to fulfil the requirement of the 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.

Section 455(4): In case of a company which has not filled financial statements or annual returns for two financial years consecutively, the ROC may issue a notice to such company and enter the name of such company in the register maintained for dormant companies.
APPLICABLE RULE: Companies (miscellaneous) Rules, 2014.

CONTENTS

1. Conditions For Obtaining Status Of Dormant Company
2. Process To Be Followed For Obtaining Status Of Dormant Company
3. Application For Seeking Status Of An Active Company

1. CONDITION FOR OBTAINING STATUS OF DORMANT COMPANY

A company shall be eligible to apply for status of dormant company only, if-

1) No inspection, inquiry or investigation has been ordered or taken up or carried out against the company.

2) No prosecution has been initiated and pending against the company under any law.

3) The company has not accepted any public deposit which are outstanding nor is the company default in payment thereof or interest thereon.
4) The company is not having any outstanding loan, whether secured or unsecured, if there is any outstanding unsecured loan, the company may apply after obtaining concurrence of the lender and enclosing the same with form MSC-1.

5) There is no dispute in the management or ownership of the company and certificate in this regard is enclosed to MSC-1.

6) The company does not have any outstanding statutory dues, taxes, duties etc. Payable to central government or state government or local authority.

7) The company has not defaulted in payment of workmen’s dues.

8) The securities of the company are not listed on any stock exchange within or outside India.

2. PROCESS TO BE FOLLOWED FOR OBTAINING STATUS OF DORMANT COMPANY

1) Call a board meeting to fix day, time and venue for the general meeting of the members to pass special resolution (at least 3/4th in Value), and approve notice for the same.
2) Engage an auditor/chartered account to issue a certificate and aauthorized any director to make application to ROC,

3) Hold EGM, Pass special resolution and File e-form MGT-14 to ROC within 30 days for the same, along with following attachments:-
(a) CTC of Special Resolution,
(b) Notice of EGM along with Explanatory Statement.

4) After filling of form MGT-14, an application in form MSC-1 should be filed to ROC within 30 days for obtaining status of dormant company, along with following attachments:-

a) Copy of board resolution authorizing making of this application.
b) Copy of special resolution.
c) Auditor's certificate.
d) Statement of affairs duly certified by CA or auditor (s) of the company.
e) Latest Financial Statement and Annual Return of the company In Case the Same Is Filed To ROC.
f) Certificate regarding no dispute in the management or ownership
g) Consent of the lender if any loan is subsisting.

5) ROC shall after considering the application and all the documents, if consider fit then shall issue a certificate in form MSC-2 allowing the status of dormant company to the applicant and maintain a register of dormant companies.

6) A dormant company shall have a minimum number of three directors in case of public company, two directors in case of private company and one director in case of one person company.

Provided that the provision of the act in relation to the rotation of the Auditor shall not apply to the dormant company.

7) The Company shall hold at least one meeting of the Board of Directors in every half year. The gap between two meetings shall not be more than 90 days.

8) A dormant company shall file a “return of dormant company” annually inter-alia, indicating financial position duly audited by a practicing CA in form MSC-3 along with fees within 30 days from the end of each Financial years. A Dormant Company need not to enclose cash flow statements in its annual accounts.

Provided That the Company shall continue to file the return or returns of allotment and change in directors in the manner and within the time specified in the Act, whenever they allots any security to any person or there is any change in the directors .


3. APPLICATION FOR SEEKING STATUS OF AN ACTIVE COMPANY:

1) For obtaining the status of an active company Form MSC-4 should be filed along with fees and a return in Form MSC-3 in respect of the financial year in which the application for obtaining the status of an active company is being filed.

Provided that ROC shall initiate the process of striking off the name of the company if the company remains as a dormant company for a period of consecutive 5 years.

2) ROC, after considering the application shall issue a certificate in Form MSC-5 allowing the status of an active company to the applicant.

3) When a dormant company does or omits to do any act mentioned in the Grounds of application in Form MSC-1 submitted to ROC for obtaining the status of dormant company, affecting its status of dormant company, the directors shall within 7 days from such event, file an application, for obtaining the status of an active company.

4) Where the ROC has reasonable cause to believe that any ‘dormant company’ under his jurisdiction has been functioning in any manner, directly or indirectly, may initiate the proceedings for enquiry under section 206 of the Act and if, it is found that the company has actually been functioning, the Roc may remove the name of such company from register of dormant companies and treat it as an active company.

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