Understanding the concept of Dormant Company

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Understanding the concept of Dormant Company

The idea of a dormant company was not there in the companies Act 1956 and it is a new concept introduced in the Companies Act 2013. Section 455 of the Companies Act speaks about the dormant company. The meaning of the Dormant Company is Active or Proactivity. Companies may apply for a dormant status if the company is incorporated for a future project.

The purpose of the dormant company is to invest now and enjoy the fruits later is the concept under which the idea of the dormant company emerges. the company will complete all formalities at present and the actual commencement of operations will take some more time. 

So restarting a dormant company is easier than the fresh start of the company. So Company with dormant status can always have an option to start operations whenever it wants without following further procedures and subject to certain conditions. So as a dormant company, the company may not be active but it still has the status of a company in the eyes of law.

There are several benefits that can be derived from the concept of dormant. Some of such benefits are:
1. The company can reserve the name and hold it for a certain time.
2. Retaining intellectual property rights until the commencement of operations.
Who can apply for Dormant Status?
As per section 455 of the companies Act 2013, a company that has not been carrying any business or not having any significant accounting transactions for last two years, the company can apply for dormant status.
The inactive company” means a company which has not been carrying on any business or operation, or 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.

      Procedure for obtaining dormant status  :

The following procedure to be adopted for obtaining dormant status
Step 1  Company should call for shareholders to meet and ensure the passing of  special resolution with ¾ majority
Step 2  After Passing special resolution, file form Miscellaneous form -1 with MCA along with prescribed fees
Step 3 Registrar if satisfied and if the terms and conditions of section 455 are satisfied, issue certificate of Dormant company
Step. 4 Registrar will maintain the list of dormant companies

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