Apply for the dormant company status of your company and save on compliance costs. A company having no business at present or created for future business or to hold property or IPR should consider obtaining the dormant status.
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The application to obtain the dormant status is filed after obtaining the consent of more than 75% of shareholders. The special resolution passed in EGM or Consent of shareholders is thus filed to ROC in MGT-14 along with the application in MSC-1.
We are a techno legal firm with specialised processing capabilities. A team led by the company secretary and corporate lawyers processes your requirement to convert the Active status to Dormant Company. We help you analyse eligibility, draft the necessary documents, and file the application with the ROC. The entire process is online and hassle-free.
If a company is inactive or the operations are on hold at present and it is likely to be operational in future or if the company is created to hold immovable property or IPR such as Trademark, Copyright, Patent etc., and does not have any significant accounting transaction, then this kind of company may apply for dormant company status. By changing the status to a “Dormant Company,” the company continues as a going concern and remains a valid legal entity for future projects or use. One of the objectives of converting an active company into a dormant company is to reduce the company’s compliance requirements under the Companies Act 2013. Here is the list of advantages when a company converts a dormant company.
Continue as legal entityProtect the Company NameReduces Compliance BurdenOption to Revive laterFewer Compliance RequirementsSimplified Annual Return FilingRotation of auditor does not applyOnly two Board Meeting in a yearWhen a company acquires the status of “Dormant Company”, it does not affect the debts, liabilities, obligations, or contracts incurred or executed before the date of change of status from an active company to a dormant company.
The legal provisions relating to a dormant company are prescribed under section 455(5) of the Companies Act and Rule 6 of the Companies (Miscellaneous) Rules, 2014. Following is the minimum statutory requirement that the applicant must fulfil before making an application to seek the dormant company status.
Public Limited Company: 3 DirectorPrivate Limited Company: 2 DirectorOne Person Company (OPC): 1 DirectorConvene an Extraordinary General Meeting (EGM) to pass a special resolution to change the status of the company to Dormant Company and file an MGT-14 form to ROC.
Note: A company having an outstanding secured or unsecured loan can also obtain the status of Dormant Company after obtaining written consent from all such lenders or creditors. Such NOC shall be attached to the application.
The Board of Directors shall pass a resolution approving the filing of an application for conversion of the company’s status as Dormant Company in the Board Meeting. The Board shall also authorise one director to act on this behalf and send Notices to all shareholders for the Extra Ordinary General Meeting.
Issue appropriate Notice calling the EGM along with an explanatory statement, clearly stating the reasons as to why the Board of directors proposes a change in the status of the company and as a “Dormant Company.”
While the EGM is scheduled, the authorised director needs to work with the Statutory Auditor or a Chartered Accountant in practice for certification of the Company’s Statement of affairs (Financials).
On the designated EGM Date, the meeting of shareholders to be conducted per secretarial standards and with the requisite quorum, a Special Resolution approving the filing of an application for conversion of the status from Active to Dormant Company need to be passed.
Every special resolution passed in EGM needs to be filed with the Registrar of Companies in the prescribed form MGT-14 with the certified true copy of the resolution along with EGM Notice within 30 days of EGM.
After the MGT-14 is filed with the ROC, an application in the Form MSC-1 along with the scan copy of all resolutions, declarations, consent of creditors and CA Certificate is filed with the ROC for its approval.
The registrar of companies examines the application made in MSC-1 and, if finds it in order, then issues a Certificate in form MSC-2. With the issue of the MSC-2 form the status of the company is changed as Dormant Company
Board Resolution authorising the conversion as Dormant CompanyCopy of special resolution passed in EGMrnment fee such as shops and establishment act or professional taxCopy of memorandum of association/articles of association.Latest financial statement and company's annual return.Statement of affairs duly certified by CA or AuditorConsent from the lender if any loan/debt is subsisting.Declaration or Certificates from the Directors of the companyTo acquire status as a Dormant Company following three applications shall be filed to the Registrar of Companies with the Prescribed Filing Fee
| No. | Form Name | Explanation | ROC Fee |
|---|---|---|---|
| 1. | e-Form - MGT-14 | The MGT-14 is filed to the ROC within 30 days of passing a Special Resolution to register the Special Resolution as required under section 117 of the companies act. | Rs. 300/- to Rs 600/- |
| 3. | e-Form - MSC-1 | The application for changing the status as Dormant Company is filed to the ROC in e-Form MSC-1 within 30 days of passing of the special resolution for change of status of the company as a dormant company | It depends on the capital of the company as per the table below. |
| No. | Authorised Capital | Other than OPC or Small Company | OPC or Small Company |
|---|---|---|---|
| 1. | Up to Rs. 25,00,000/- | Rs. 2,000/- | Rs. 1,000/- |
| 3. | Rs. 25,00,001 To 50,00,000/- | Rs. 5000/- | Rs. 2,500/- |
| 3. | Rs. 50,00,001 To Rs 5 Crores | Rs. 10,000/- | N/A |
| 4. | Rs 5 Crores to Rs 10 Crores | Rs. 15,000/- | N/A |
| 5. | Above Rs. 10 Crores | Rs. 20,000/- | N/A |
The companies convert as Dormant to hold property, Intellectual Property Rights or to be utilised for a future business. For example, a real estate developer may buy land for future projects. As a dormant company, ensure that the company meets minimum compliance to following after it has acquired the Dormant Company Status.
While a company is on Dormant Status, it should meet the requirements of a minimum number of directors all the time under the Companies Act 2013. The minimum number of required directors as per the company type is as follows
Public Limited Company: 3 DirectorPrivate Limited Company: 2 DirectorOne Person Company (OPC): 1 DirectorEven when the company is dormant, the Board of Directors must meet at least once every six months.
If the dormant company allots new shares while the company is under Dormant Status, it shall continue to file Return of Allotment in PAS-3 Form.
Even if it has acquired dormant status, the company shall continue to maintain its registered office so that communication from the government departments and other stakeholders is received and responded to.
There is a myth surrounding the status of the Dormant Company. There are people who believe that by converting as a Dormant Company, they don’t have to do anything concerning compliance. Though there is relaxation with respect to several provisions of the Companies Act, it does not mean that the company does not have to do annual compliance for a dormant company. There are four constituents of annual compliance such as accounting, statutory audit, ITR filing, and ROC Returns. We shall be discussing each aspect separately below.
An inactive company or a company that does not have any significant accounting transactions acquires a dormant company status. Though no revenue-generating activities are permitted but still a dormant company needs to comply with the applicable laws of India and can only do the following transactions
Payments to ROC or towards fulfilling the requirements under the Companies ActPayment of any government fee such as shops and establishment act or professional taxTransactions relating to allotment of sharesPayments toward office or records maintenance.Payment to auditors or to legal fee
