Procedure for Obtaining Dormant Status by a Company

Aakanksha Singhal

Aakanksha Singhal

Published on: May 21, 2022

Khushboo Sharma

Updated on: Sep 30, 2023

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Introduction [Section 455(1) of the Companies Act, 2013]:

When a company is formed and registered in terms of the Companies Act, 2013 for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may upon application to the Registrar as stipulated in the provisions of the Act obtain the status of a dormant company.

Note:

1. Inactive company refers to a company that has not been engaged in any business or operations or has not entered into any significant accounting transaction during the last 02 financial years or has not filed its financial statements and annual returns for the last 02 financial years
2. Significant accounting transaction refers to any transaction other than
   • payment of fees made by the company to the Registrar
   • payments effected to discharge the requirements of this Act or any other statutory law
   • llotment of shares to discharge the requirements of this Act, and
   • payments for the alimentation of its office and records

Mandatory Requirements:

1. Company shall have a minimum number of directors as under [Section 455(5) of the Act and Rule 6 of the Companies (Miscellaneous) Rules, 2014]
   • directors in case of a public company
   • directors in case of a private company and
   • director in case of a One Person Company
2. Passing a special resolution in the general meeting for obtaining the dormant status or issue a notice to all the shareholders of the company to obtain the consent of a minimum of 3/4th of shareholders (in value) for the purposes of obtaining dormant status [Rule 3 of the Companies (Miscellaneous) Rules, 2014]
3. Application for obtaining dormant status shall be subject to the fulfilment of the following conditions [Proviso to Rule 3 of the Companies (Miscellaneous) Rules, 2014]:
• No inspection, inquiry, or investigation has been ordered/taken up/carried out against the company
• No initiation or pendency of any prosecution against the company under any law
• No outstanding public deposits or default in payment or interest thereon
• No outstanding secured or unsecured loans
• No dispute in the management or ownership of the company and a certificate to this effect is to be appended with the application
• No outstanding statutory taxes, dues, duties, etc. payable to the Central Government or any State Government or local authorities, etc.
• No outstanding statutory taxes, dues, duties, etc. payable to the Central Government or any State Government or local authorities, etc.
• Company’s securities are not listed on any stock exchange within or outside India.

Note: In case of any outstanding unsecured loan, the company may make an application for obtaining dormant status ensuing to the receipt of the lender’s concurrence to this effect and enclosing the same with the application in Form MSC-1.

Procedure:

1. Convene a Meeting of the Board of Directors [As per section 173 & SS-1]:
   Refer to the Procedure for Conducting Board Meeting for a detailed procedure.
2. Convene General Meeting [Section 96, 100, and SS-2]:
   Refer to the Procedure for Conducting Extraordinary General Meeting (EGM) for a detailed procedure
3. File Form MGT-14 with ROC
   The company shall file a copy of the Special Resolution with the Registrar of Companies (ROC) in form MGT-14 within 30 days of passing such resolution.
4. Application for Obtaining Status of Dormant Company [Rule 3 of the Companies (Miscellaneous) Rules, 2014]:
   The Company after passing a special resolution in their general meeting or after issuing a notice to all their shareholders for obtaining the consent of at least 3/4th of shareholders (in value) for obtaining the dormant status shall make an application in Form MSC-1 to the Registrar along with the fees as per Companies (Registration Offices and Fees) Rules, 2014 and the following documents:
   • Certified true copy of board resolution ratifying the proposal for obtaining dormant status
   • Certified true copy of special resolution ratifying the proposal for obtaining dormant status
   • Auditor’s certificate
   • Statement of affairs duly certified by Chartered Accountant or Auditor(s) of the company
   • Copy of approval or NOC from the regulatory authority in case the company is regulated by such authorit
   • Company’s latest financial statement and annual return are mandatory to be attached with the application in case the same is filed to Registrar
   • Consent of the lender in case any loan is outstanding
5. Issuance of Certificate of Dormant Status [Section 455(2) of Companies Act, 2013 and Rule 4 of the Companies (Miscellaneous) Rules, 2014]:
   The Registrar after due consideration of the application shall grant dormant company status to the applicant and issue a certificate allowing the status of a dormant company to the applicant in Form MSC-2.
6. Return of Dormant Companies [Rule 7 of the Companies (Miscellaneous) Rules, 2014]:
   
   • The dormant company is required to file an annual return of dormant company inter-alia specifying its financial position duly audited by a Chartered Accountant in practice in Form MSC-3 within 30 days from the end of each financial year along with an annual fee as prescribed in the Companies (Registration Offices and Fees) Rules, 2014 and the following documents
     • 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 optional attachment(s) as may deem fit
   • The company shall continue to file the returns of allotment and change in directors in the manner and timelines specified in the Act, whenever the company allots any security to any person or there is any change in the directors of the company

Note: The Register maintained under the portal maintained by the Ministry of Corporate Affairs on its website www.mca.gov.in or any other website notified by the Central Government, shall be the register for dormant companies. [Section 455(3) of Companies Act, 2013 and Rule 5 of the Companies (Miscellaneous) Rules, 2014]