Dormant Company – Reactivation, Procedure, Key points
Companies Act

Dormant Company – Reactivation, Procedure, Key points

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  Posted on November 24, 2021

Dormant Company – Reactivation, Procedure, Key points

When a company is formed and has been registered for any future project or for holding an asset or intellectual property, but has no accounting transaction which is relevant, then the company in question or the one which is an inactive company shall make an application to the Registrar of Companies (ROC) for obtaining a Dormant Company status.

Here, an inactive company basically means:

  • a company that has not been carrying any business or operation, or
  • It has not made any important accounting transaction during the last two relevant financial years, or
  • has not filed any financial statements or annual returns during the last two relevant financial years.

Significant Accounting Transaction can be understood as any transaction other than:

(a) The payment made by company to the Registrar of Companies in the form of fees

(b) Payments which are made by company in order to fulfill the requirements of this Act (Companies Act) or any other law in force

(c) Allotment of shares which has been made in order to fulfill the requirements of this Act, and

(d) Payments made for ensuring the maintenance of its office and records.

Important Provisions to be considered before making an application

Before making the application to the ROC, the company should obtain a clean chit for which the following provisions are to be considered:

(i) There is no inspection, inquiry, or investigation which has been ordered or taken up or has been carried out against the company

(ii) The is no prosecution initiated and is pending against the company under any law that is in force for the time being

(iii) The company is neither having any public deposits which are outstanding nor the company is in default in making the payment thereof or payment of interest thereon

(iv) The company is not having any outstanding loans, whether secured or unsecured. Provided that if there is any outstanding unsecured loan, then the company may apply under the provisions of this rule, but only after obtaining concurrence from the lender and enclosing this concurrence obtained with the Form MSC-1 which is to be filed

(v) There has not been any dispute in the management or in respect to the holding of  ownership of the company and a certificate in this regard is enclosed with the Form named MSC-1

(vi) The company does not have in its name or is holding any liability with respect to an outstanding statutory tax, dues, duties, etc. which is payable to the Central Government or any State Government or local authorities

(vii) The company has not committed any defaulted in the payment of their employees or workmen’s dues

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

Procedure to Apply for Certificate of Dormant Company

  1. Hold a Board meeting with two directors or a majority of directors and resolution for status of dormant company.
  2. Now fix a date, place, and agenda for conducting an extraordinary general meeting of the company.
  3. Issue notice in writing for calling the general meeting of the company, proposing a resolution with a suitable explanatory statement.
  4. Hold the Extraordinary general meeting and pass such resolution.
  5. Now file form MGT-14 within 30 days of holding the meeting and passing the resolution.
  6. The company shall now make an application in Form named MSC-1. Along with a payment of the necessary fees as specified in the Companies (Registration Offices and Fees) Rules, 2014shall be made.
  7. After the consideration of the application made by the company in Form named MSC-1, the Registrar of Companies shall issue the company, a certificate in Form MSC-2 which would allow the company to get the status that of a Dormant Company.
  8. Every company shall be required to file a financial position duly audited by a Chartered Accountant within 30 days from the end of the financial year in Form MSC-3.
  9. The register which is maintained by the MCA (Ministry of Corporate Affairs) portal, www.mca.gov.in, or such other website which is notified by the Central Government shall be considered as the register of dormant companies.

Reactivation of Dormant Company

  1. A dormant company which is using form MSC-4 shall make an application to the Registrar such that they can convert the status of Dormant Company into an active company.
  2. The fee which has been specifically prescribed under the ruled laid down in Companies (Registration Offices and Fees) Rules, 2014, should also be paid with the application filed for Conversion of Dormant Company into Active Company.
  3. And after considering such application along with its validity, the Registrar shall approve the application and issue a certificate in Form named MSC-5, which would convert the status of the company from Dormant to Active company.

Key Points to be noted

  1. In case of a company that has not filed financial statements or annual returns for a period of two financial years in a consecutive or continuous manner, then the Registrar shall issue a notice to such company in this regard. Along with this he shall also enter the name of such company in the register of Dormant Companies.
  2. A dormant company shall have such specified minimum number of directors.And it shall also file such documents along with the payment of specified fees to the Registrar so as to retain its dormant status. And for becoming or changing its status to an Active company, it shall make an application accompanied by such documents and fees as well.
  3. And the registrar hold the right to strike off the name of a dormant company that would fail to comply with the requirements of this section 455 or concerning provisions of the Companies Act.

 

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