Dormant Company : A New Concept of the New Act

 

DORMANT COMPANY

 {Section 455 of the Companies Act, 2013 read with Companies (Miscellaneous) Rules, 2014}

[Effective from 1st April, 2014]

 

 

New Concept and new definition, yes, the Companies Act, 2013 introduced a new concept i.e. Dormant Company, for the Companies which are registered under this Act and for the inactive Companies incorporated under the Companies Act, 1956.

 

This concept will help of those companies which are not doing any business activity for last two years and don’t want their company’s name to be struck off from the Register of Companies. In the Current situation, this will help the Startup Companies, who have idea to execute and incorporated the company but want some time to execute or to accomplish it.

 

As per Section 455 of the Companies Act, 2013, where a company is formed and registered under this Act

  1. for a future project, or
  2. to hold an asset or intellectual property, and
  3. has no significant accounting transaction,

Such a company or an inactive company may make an application to the Registrar in the Form MSC-1 for the status of a dormant company

 

“Inactive company” means a company which

  1. has not been carrying on any business or operation, or
  2. 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” means any transaction other than –

  • payment of fees by a company to the Registrar;
  • payments made by it to fulfill the requirements of this Act or any other law;
  • allotment of shares to fulfill the requirements of this Act; and
  • Payments for maintenance of its office and records.

 

User should ensure that e-Form MGT-14 must have been filed before for special resolution authorizing for obtaining dormant status and the company must not be a listed company and also:

  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 is neither having any public deposits which are outstanding nor the company is in default in payment thereof or interest thereon;
  4. the company is not having any outstanding loan, whether secured or unsecured:
  5. there is no dispute in the management or ownership of the company and a certificate in this regard is enclosed withForm MSC-1;
  6. 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.;
  7. the company has not defaulted in the payment of workmen’s dues;

 

Note:   If there is any outstanding unsecured loan, the company may apply under this rule after obtaining consent/No objection/concurrence of the lender and enclosing the same with Form MSC-1.

 

GROUNDS OF APPLICATION

 

  1. If the company is formed and registered under the Companies Act, 2013 then please select from one of the options – any future project or holding as asset or intellectual property and also that the company did not have any significant transaction since incorporation.

 

  1. If the company is formed and registered under the Companies Act, 1956 then select at least one of the followings:
    1. The company has not been carrying on any business since……………….………………….
    2. The company has not made any significant accounting transaction since ………………
    3. The company has not filed financial statements and annual return since……….

 

POWER OF ROC

  1. 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.
  2. The Registrar 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.

 

APPLICATION FOR OBTAINING STATUS OF DORMANT COMPANY

 

The company may make an application in Form MSC-1along with such fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 (Fee range is from Rs. 2,000/- to Rs. 20,000/- on the basis of Authorized Share Capital) to the Registrar for obtaining the status of a Dormant Company within 30 days of passing a special resolution to this effect in the General Meeting of the company or after issuing a notice to all the shareholders of the company for this purpose and obtaining consent of at least 3/4th shareholders (in value).

Note:   As Date of passing Special Resolution and SRN of MGT-14 is mandatorily required in the form MSC-1, the Company shall has to mandatorily required to hold General meeting for passing special resolution. So, there is no relevance of obtaining consent of at least 3/4th shareholders in value.

Attachments with the forms MSC-1:

  1. Certified true copy of board resolution authorizing making of this application.
  2. Certified true copy of special resolution authorizing for obtaining dormant status
  3. Auditor’s certificate
  4. Statement of affairs duly certified by Chartered Accountant or Auditor(s) of the company
  5. Copy of approval or no objection certificate (NOC) from the regulatory authority in case company is regulated by such authority
  6. Latest financial statement and annual return of the company is mandatory to attach in case the same is filed to Registrar
  7. Consent of the lender if any loan is outstanding
  8. Certificate regarding no dispute in the management or ownership;
  9. Any other document.

 

The Registrar shall,after considering the application filed in Form MSC-1, issue a certificate in Form MSC-2 allowing the status of a Dormant Company to the applicant.

 

 

REGISTER OF DORMANT COMPANIES

 

The ROC shall maintain a register of Dormant Companies on www.mca.gov.in website maintained by the Ministry of Corporate Affairs or any other website notified by the Central Government.

 

COMPLIANCES AFTER TAKEN OF DORMANT STATUS

  • A dormant company shall have a minimum number of three directors in case of a public company, two directors in case of a private company and one director in case of a One Person Company.

 

  • Provision of rotation of Auditor is not applicable on Dormant Companies.

 

  • A dormant company shall file a “Return of Dormant Company” annually, indicating financial position duly audited by a Chartered Accountant in Practice in Form MSC-3along with such annual fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 within a period of 30 days from the end of each financial year with following attachments:
  • Certified true copy of Board resolution showing authorization given for filing this declaration. (Mandatory)
  • Duly audited statement of financial position by a chartered accountant in practice. (Mandatory)
  • Any other information can be provided as an optional attachment(s).

 

  • The Company shall continue to file the return or returns of allotment and change in directors 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 company.

 

  • The Dormant Company is required to hold at least 2 Board meeting in a financial year and the gap between the 2 Board meetings shall not be less than 90 days.

 

APPLICATION FOR SEEKING STATUS OF AN ACTIVE COMPANY

  1. An application obtaining the status of an active company shall be made in Form MSC-4along with fees as provided in the Companies (Registration Offices and Fees) Rules, 2014 (Fee range is from Rs. 2,000/- to Rs. 20,000/- on the basis of Authorized Share Capital) and shall be accompanied by 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.
  2. The Registrar shall issue a certificate in Form MSC-5allowing the status of an active company to the applicant.
  3. Where a dormant company does or omits to do any act mentioned in the Grounds of application (See above) inForm MSC-1 submitted to Registrar 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 in form MSC-3 for obtaining the status of an active company.
  4. Where the Registrar has reasonable cause to believe that any company registered as ‘dormant company’ under his jurisdiction has been functioning in any manner, directly or indirectly, he may initiate the proceedings for enquiry under section 206of the Act and if, after giving a reasonable opportunity of being heard to the company in this regard, it is found that the company has actually been functioning, the Registrar may remove the name of such company from register of dormant companies and treat it as an active company.

 

CONCLUSION

When an e-Form MSC-4 is processed by the authority concerned, it may be rejected on the following grounds:

Rejection Code Description
1 Information given is incorrect.
2 Annual filings are not done.
3 Mandatory filings are not done.
Others In this case the description is entered by Back Office User.

 

When you see the Help Manual of E-form MSC-4, you can see the above mentioned Ground of rejection of the Form. I don’t know why it is the ground of rejection of the form. But, on the basis of above table, it is clear that Dormant Company is also required to file Annual Filing Forms i.e. AOC-4 and MGT-7.  

Now one question arises here, why? This question came in my mind because no relaxation is given to the Dormant Companies in terms of normal Compliances. Dormant company has to retain Minimum Directors, shall hold at least 2 board meetings as well, any change in share capital and Directors then also shall have to intimate to the ROC, not relaxation in holding AGM that is also required to be hold. One formality has already increased that is to file e-form MSC-3 (Return of Dormant Company), this is extra burden on the company.

In the Act, it is written that the company has to pay annual fee that will be paid with the form MSC-3. Then what is the need to file Annual filing forms? But, this could be known through practically done.

 

 

 

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For any further queries, feel free to call or mail:

 

VISHAL SHARMA

Company Secretary

Membership No.: A 42678

Mob: 9716763754

Email: csvishalpbs@gmail.com, vishal_swiss456@yahoo.in

 

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VISHAL SHARMA | Company Secretary

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