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Is your company inactive, awaiting a future project, or holding assets without carrying on regular business operations?
CA India provides professional assistance with dormant company status applications under the Companies Act, 2013.
What Is Dormant Company Status?
Under Section 455 of the Companies Act, 2013, a company may apply to the ROC for dormant status if it is formed and registered for a future project, to hold an asset or intellectual property, or has not been carrying on business or operations or making significant accounting transactions.
A company may also qualify as inactive if it has not carried on business or operations or made significant accounting transactions during the preceding two financial years, or has not filed financial statements or annual returns for the preceding two financial years, subject to the applicable provisions.
Dormant status allows an eligible company to retain its legal identity while remaining inactive. However, it does not mean that the company is exempt from every statutory obligation.
The application is made through Form MSC-1. If approved, the ROC issues a certificate of dormant status in Form MSC-2.
Eligibility Conditions for Dormant Company Registration
Before applying, the company must satisfy the applicable statutory conditions and documentary requirements.
Shareholder
Approval
Pass a special resolution in a general meeting or obtain the prescribed consent of at least three-fourths of shareholders in value, following the applicable procedure.
No Pending Inspection or Investigation
The company must meet the applicable restrictions relating to inspections, inquiries, and investigations.
No Pending
Prosecution
It must satisfy the relevant conditions concerning pending prosecutions under the law.
Deposit
Compliance
There must be no outstanding public deposits or default in their repayment or interest, as applicable.
Loans and
Borrowings
Outstanding secured or unsecured loans must be reviewed. Outstanding unsecured loans may be permitted in the specified circumstances with the lender’s concurrence and the required supporting documentation.
No Management Or Ownership Disputes
The company must meet the applicable requirements concerning disputes over management or ownership.
Statutory
Dues
Applicable taxes, duties, and other statutory dues must be addressed.
Unlisted
Securities
The company must satisfy the applicable restrictions concerning securities listed on stock exchanges.
Additional eligibility requirements and exceptions may apply. CA India can review your company’s current records before confirming whether an application can proceed.
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Dormant Status Application Procedure
CA India can assist with the following steps to apply for dormant company status.
Review Company Eligibility
Examine the company’s financial position, statutory filings, outstanding liabilities, and intended reason for seeking dormant status.
Conduct The Board Meeting
Prepare the relevant Board resolution approving the proposal to apply for dormant status and authorising the necessary actions.
Obtain Shareholder Approval
Arrange the applicable general meeting & special resolution, or follow the prescribed process for obtaining consent from at least 3-4th of shareholders in value.
File Form MGT-14, Where Required
Complete the filing for the special resolution within the prescribed period, generally 30 days, where applicable.
Prepare The Supporting Docs
Compile the statement of affairs, auditor or practising CA certification, declarations, lender consent where applicable, & other prescribed attachments.
Submit Form
MSC-1
Prepare and file the application with the ROC through the MCA portal, along with the applicable government fee and required attachments.
Respond to Further Requirements
Address any clarification or resubmission requirements raised during processing, where applicable.
Receive The
Approval
If the application is approved, the ROC issues the certificate granting dormant status in Form MSC-2.
Compliance Obligations After Obtaining Dormant Status
Dormant status can reduce certain compliance burdens, but the company must continue meeting the obligations applicable to dormant companies.
Step 1
Annual Form MSC-3
A dormant company must generally file its AR in Form MSC-3 within 30 days from the end of each FY, together with the prescribed fee & the required info, including its financial position duly audited by a practising CA.
Step 2
Board Meetings
Dormant companies must follow the applicable rules regarding Board meetings. Under the prescribed framework, at least one Board meeting is required in each half of the calendar year, with the required minimum gap between meetings.
Step 3
Minimum Directors
The company must continue to maintain the prescribed minimum number of directors for its company category.
Step 4
Other Statutory Filings
Where applicable, the company must continue filing prescribed returns for allotment of securities and changes in directors, within the relevant statutory deadlines.
Step 5
Duration Of Dormant Status
A company cannot remain dormant for more than five consecutive financial years under Section 455. It should plan to resume active status or take the appropriate steps before the statutory limit is reached.
Step 6
Reactivation
If the company intends to resume business operations, it can apply to change its status from dormant to active using Form MSC-4, subject to the applicable requirements.
Frequently Asked Questions
What is Form MSC-1 used for?
Form MSC-1 is used to apply to the ROC for dormant company status under Section 455 of the Companies Act, 2013.
What is Form MSC-2?
Form MSC-2 is the certificate issued by the ROC when an application for dormant company status is approved.
Can an inactive private limited company apply for dormant status?
Yes, if it satisfies the applicable eligibility conditions and completes the required approval and filing procedures. Inactivity alone does not guarantee approval.
Does a dormant company need to file annual returns?
Yes. A dormant company generally needs to file its annual return in Form MSC-3 within 30 days from the end of each financial year, with the prescribed fee and supporting financial information.
Can a company with outstanding loans apply for dormant status?
The company’s borrowing position must be reviewed against the applicable rules. Outstanding unsecured loans may be permitted in specified circumstances if the lender’s concurrence and required documentation are provided. Other restrictions may apply.
How long can a company remain dormant?
Under Section 455, a company cannot remain dormant for more than five consecutive financial years. It should plan to return to active status or take other appropriate action within the applicable framework.
Can a dormant company become active again?
Yes. A dormant company may apply to change its status to active using Form MSC-4, subject to the prescribed procedure and requirements.
How much does dormant status filing cost?
The total cost depends on the applicable government fees, the company’s eligibility, the documents required, and the professional assistance involved. Contact CA India for a quote based on your company’s circumstances.