Dormant Companies - Sec- 455

Dormant Companies - Sec- 455

• In certain cases, Companies are formed only for the purpose of holding certain assets or IPR or for a future project and such companies do not have routine accounting transactions. Further, it is also likely that certain entities could be inactive with the opening and the closing Balance Sheets for the year remaining virtually unchanged except for some Accounting, Audit and administrative expenses

Listed Companies ( India / abroad ) cannot apply for Dormant Status

This section deals with 2 types of Companies 

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

i. An inactive company ( means ) a company which has not been carrying on any business or operation, or has not made any significant accounting transaction or has not filed financial statements and annual returns during the last two financial years

ii. “significant accounting transaction” does not include—

a. payment of fees by a company to the Registrar;

b. payments made by it to fulfill the requirements of this Act or any other law;

c. allotment of shares to fulfill the requirements of this Act; and

d. payments for maintenance of its office and records.

• Both of these Companies may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company.

• The Registrar on consideration of the application shall allow the status of a dormant company to the applicant and issue a certificate in such form as may be prescribed to that effect.

• The Company needs to get the consent for this dormant application by a special resolution or by obtaining consent of ¾ of shareholders in value by issuing a notice

• The Registrar shall maintain a register of dormant companies in such form as may be prescribed.

• 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

• The registrar has also been conferred specific powers to issue a notice to companies who have not carried on any business or operation for two immediately preceding financial years and if sufficient response is not received within 30 days, he may also remove the Company from the register of Companies (Sec 248)

• A dormant company shall have such minimum number of directors, file such documents and pay such annual fee to the Registrar to retain its dormant status in the register and may become an active company on an application made in this behalf accompanied by such documents and fee as may be prescribed.

• The Registrar shall strike off the name of a dormant company from the register of dormant companies, which has failed to comply with the requirements of this section

• The Company can reapply to get its status reverted to “active” by making an application to the Registrar.  In fact, in case any activity is performed (beyond the inactive definition above), the Company is obligated to get its status changed by such an application

• In case the dormant status continues for 5 years, the RoC shall initiate the process of strike off of name from the Register of Companies