Change of Status to a Dormant Company : Legal Compliances

Bhuwan Prakash

This article throws light on the provisions relating to change in the status of a company from 'active' to 'dormant' and certain compliances required for the functioning of a dormant company.

1. Introduction

A new concept of 'Dormant company' has been introduced by Companies Act, 2013. Dictionary meaning of 'dormant' is 'temporarily inactive'. A company cannot be formed as a dormant company. Only an active company's status can be changed from 'active' to 'dormant' in certain circumstances. Where a company's status changes to a dormant company, the requirement as to legal compliances by such company becomes minimal. Section 455 of the Companies Act, 2013 alongwith Companies (Miscellaneous) Rules, 2014 deals with the provisions regarding a dormant company.

2. Modes of acquiring the status of dormant company

A company can acquire the status of a dormant company in two ways:

(i) On an application by the company; or

(ii) by Registrar suo-motu.

(i) On an application by company

Following companies would eligible to file an application for declaring their status as dormant company:

(a) Company which is formed and registered under the Companies Act, 2013 for a future project or to hold an asset or intellectual property and has no significant accounting transaction;

(b) an inactive company. [Section 455(1)]

Note: (1) 'Significant accounting transaction' here means any transaction other than the following:

(A) payment of fee by a company to the Registrar;

(B) payments made by it to fulfil the requirements of Companies Act, 2013 or any other law;