Dormant Company – Meaning, Benefits and Section 455 of Companies Act, 2013

Understanding the concept of a Dormant company

What are Dormant companies?

Getting dormant status for Company

1. Suo Moto Application: A company that meets the above criteria may apply Suo-moto to the Registrar of Companies in the form of 'Dormant Company' on Form MSC-1 and the fees payable to companies (Registration Offices and Fees Regulations, 2014 after complying with the provisions of Company Act 3 2014.
2. Loss by ROC: In the event that a company has not completed the financial statements or annual returns for 2 consecutive years, the Registrar may issue a notice to that company and enter the company's name in the register kept for Unemployed Companies.

Eligibility:

For the purposes of this section, the clarification appended to section 455(1) states that

1. Important financial activity ’’ means any transaction other than
2. Payment of company fees by the Registrar;
3. Payments made by it for the purposes of this Act or any other law;
4. Allocation of shares to meet the requirements of this Act; and
5. Fees payable for the maintenance of its office and records.

Procedure for obtaining the status of the company as dormant

• Certified copy of board decision.
• Certified copy of the special resolution.
• Certificate from the auditor.
• A statement of news, duly approved by the auditor or chartered accountant.
• You must attach a Return Return and Recent Financial Statement forcibly.
• A certificate stating that there is no dispute between management or ownership.
• If there is any loan in the company, the lender's permit must be included.

Required documents for obtaining a Dormant Company status

• A certified copy of the decision of the board authorizing the implementation of the plan.
• A certified copy of the special order https://www.legalraasta.com/blog/mgt-14/authorizing the acquisition of accommodation, for submission to the clerk on Form MGT-14.
• Auditor's Certificate
• The news statement is duly certified by the Chartered Accountant or the company's auditors
• A copy of the approval of the opposition certificate (NOC) from the controlling authority in the event that the company is controlled by that authority
• The latest financial statements and annual company returns are required to attach in the event of a similar filing to the Registrar
• Consumer's consent if the loan is outstanding
• Certificate of disputes between management or ownership

Compliance to be made by the Company after obtaining the status of the Dormant Company

1. A dormant company will keep a small number of managers.
2. The dormant company will submit a "Return of Dormant Company" audited by a Chartered Accountant working on Form MSC-3 within 30 days from the end of each financial year.
3. In terms of Section 173 (5), the Dormant Company is required to convene at least one meeting of the Board of Directors held each part of the calendar year and the gap between the two meetings is not less than 90 days.

Benefits of Dormant Company

1. Company Name Protection - Intellectual property owned by a dormant company includes a trademark of a company name. The company name is protected so that others are not allowed to trade under the name of the dormant company.
2. Future Project - A company may be formed to prepare for a future project. This means the intent of the promoters to trade and therefore to keep the domain name. A good example of this as mentioned in Ramaiya is a company that has acquired a lease but is awaiting further permits before starting a business. (page 5755)
3. Company History - While this is not the most important benefit, by establishing a company that started and later started a business, it can be said to have been well established since its inception even though it may have started its own business later. It helps the company to show a better image to potential customers and / or lenders.

When to apply for a dormant status?

1. "Unemployed company" means a company that has not conducted or operated a business, or has not performed significant accounting functions in the last two financial years, or has not submitted annual financial statements and returns during the last two financial years;
2. "Important Accounting Activity" means some other transaction than-

• Payment of company fees by the Registrar;
• Payments made by it for the purposes of this Act or any other law;
• Allocation of shares for the purposes of this Act; and
• Office fees and records. ”

How to get the status of Dormant Company

1. A company must submit a Special Decision at a general meeting of the company or notify its shareholders and obtain the approval of at least three quarters of the shareholders.
2. The Company must apply from From MSC - 1 to the Department of Cooperatives and pay the prescribed fee under the Companies Act (Registration and Finance Offices), 2014.
3. Upon satisfaction, the Registrar shall issue a Certificate of Unemployment Company. (Note that the Registrar must be satisfied that the company complies with the requirements set out in Section 455 and the relevant Rules before issuing a certificate.)
4. The registrar will keep a register of unemployed companies.

Conditions should be met by obtaining dormant status

• No inspections, investigations, or investigations should have been ordered or conducted or conducted against the company.
• No prosecution had to be initiated and awaited by the company under any law.
• The Company must not have any public deposits unpaid and must not be liable for payment or interest on it.
• The company should not have any outstanding loans, whether they are secured or unsecured.
• There should be no dispute in the management or ownership of the company and a certificate in this regard must be submitted on Form MSC-1.
• The company should not have any official taxes, fees, duties, etc. Payable to the Central Government or any State Government or local authorities etc.
• The company should not have failed to pay its employees' salaries.
• Company security should not be listed on any stock exchange within or outside India.

Conclusion