{"id":834,"date":"2025-02-28T00:00:00","date_gmt":"2025-02-28T00:00:00","guid":{"rendered":"https:\/\/rize.blog.razorpay.in\/dormant-company\/"},"modified":"1970-01-01T00:00:00","modified_gmt":"1970-01-01T00:00:00","slug":"dormant-company","status":"publish","type":"post","link":"https:\/\/razorpay.com\/rize\/blogs\/dormant-company\/","title":{"rendered":"Dormant Company Meaning: Section 455 of Companies Act 2013"},"content":{"rendered":"<h2 id=\"\">What Is a Dormant Company?<\/h2>\n<p id=\"\">Under the Companies Act, 2013, a <strong id=\"\">dormant company<\/strong> refers to an entity that is temporarily inactive, with no significant accounting transactions during a financial year. The <strong id=\"\">definition of a dormant company<\/strong> encompasses companies that are:<\/p>\n<ul id=\"\">\n<li id=\"\">Incorporated for future projects<\/li>\n<li id=\"\">Established to hold assets or intellectual property<\/li>\n<li id=\"\">Not engaged in any significant financial transactions<\/li>\n<\/ul>\n<p id=\"\">To be eligible for <strong id=\"\">dormant company status<\/strong>, a company must meet the following criteria:<\/p>\n<ul id=\"\">\n<li id=\"\">No significant accounting transactions during the last two financial years<\/li>\n<li id=\"\">No filing of financial statements and annual returns with the Registrar of Companies (ROC) in the preceding two financial years<\/li>\n<\/ul>\n<p id=\"\">It&#8217;s important to note that a company can remain dormant for a maximum of five consecutive financial years. After this period, the company must either commence operations or apply for an extension of dormant status with the ROC.<\/p>\n<h2 id=\"\">Is a Dormant Company Allowed To Trade?<\/h2>\n<p id=\"\">A <strong id=\"\">dormant company<\/strong> is not allowed to conduct significant business transactions, such as:<\/p>\n<ul id=\"\">\n<li id=\"\">Buying or selling goods and services<\/li>\n<li id=\"\">Engaging in revenue-generating operations<\/li>\n<li id=\"\">Undertaking any other form of trade<\/li>\n<\/ul>\n<p id=\"\">However, a <strong id=\"\">dormant company<\/strong> can carry out certain essential activities, including:<\/p>\n<ul id=\"\">\n<li id=\"\">Paying fees and fulfilling compliance requirements under the Companies Act or other applicable laws<\/li>\n<li id=\"\">Maintaining its registered office and records<\/li>\n<li id=\"\">Allotting shares to shareholders<\/li>\n<\/ul>\n<p id=\"\">Engaging in active trading or substantial business transactions may lead to the loss of <strong id=\"\">dormant company status<\/strong>. Therefore, it is crucial for business owners to ensure that their dormant company remains compliant with the prescribed regulations.<\/p>\n<h2 id=\"\">A Brief Overview of Dormant Status Under the Companies Act 2013<\/h2>\n<p id=\"\"><a id=\"\" href=\"https:\/\/ca2013.com\/455-dormant-company\/\" target=\"_blank\" rel=\"noopener\">Section 455 of the Companies Act 2013<\/a> introduced the concept of <strong id=\"\">dormant companies<\/strong> to provide a legal framework for businesses that wish to temporarily suspend their operations while maintaining their legal status. This provision allows companies to:<\/p>\n<ul id=\"\">\n<li id=\"\">Preserve their assets and intellectual property<\/li>\n<li id=\"\">Reduce compliance costs during periods of inactivity<\/li>\n<li id=\"\">Keep their company name reserved for future projects<\/li>\n<\/ul>\n<h3 id=\"\"><strong id=\"\">Meaning of Inactive Company<\/strong><\/h3>\n<p id=\"\">An inactive company, as per the Companies Act 2013, is a company that:<\/p>\n<ul id=\"\">\n<li id=\"\">Has not conducted any significant financial transactions during the last two financial years<\/li>\n<li id=\"\">Has not filed financial statements and annual returns with the ROC for the preceding two financial years<\/li>\n<\/ul>\n<h2 id=\"\">Reasons for Obtaining the Status of a Dormant Company<\/h2>\n<p id=\"\">There are several reasons why a company may choose to obtain <strong id=\"\">dormant company status<\/strong>:<\/p>\n<ul id=\"\">\n<li id=\"\">To preserve the company name for future business ventures<\/li>\n<li id=\"\">To hold assets or intellectual property without actively engaging in business operations<\/li>\n<li id=\"\">To reduce compliance costs and regulatory burdens during periods of inactivity<\/li>\n<li id=\"\">To facilitate business restructuring or strategic planning<\/li>\n<li id=\"\">To maintain legal status while the promoters or directors are unavailable due to personal reasons, such as illness, travel, or sabbatical<\/li>\n<\/ul>\n<h2 id=\"\">Top 5 Benefits of Opting for Dormant Company Status<\/h2>\n<ol id=\"\">\n<li id=\"\"><strong id=\"\">Reduced Compliance Requirements<\/strong>: Dormant companies are subject to significantly fewer compliance obligations under the Companies Act 2013. This includes exemptions from holding frequent board meetings, appointing auditors, and filing detailed annual returns.<\/li>\n<li id=\"\"><strong id=\"\">Cost Savings<\/strong>: By reducing compliance requirements, <strong id=\"\">dormant companies<\/strong> can save on administrative expenses, such as auditor fees, legal costs, and filing charges. This can be particularly beneficial for small businesses and start-ups looking to minimise overhead costs.<\/li>\n<li id=\"\"><strong id=\"\">Brand Name Protection<\/strong>: Registering as a dormant company allows businesses to protect their brand name and prevent others from registering a similar name. This is crucial for companies that have invested in building a strong brand identity and want to preserve it for future use.<\/li>\n<li id=\"\"><strong id=\"\">Flexibility for Future Business Plans<\/strong>: <strong id=\"\">Dormant company status<\/strong> provides businesses with the flexibility to reactivate their operations when the time is right. This can be particularly useful for companies that are waiting for market conditions to improve or for key personnel to return from extended absences.<\/li>\n<li id=\"\"><strong id=\"\">Simplified Annual Filings<\/strong>: Dormant companies are required to file a simplified version of the annual return, known as <a id=\"\" href=\"https:\/\/www.mca.gov.in\/MCA21\/dca\/help\/instructionkit\/NCA\/Form_MSC-3_help.pdf\" target=\"_blank\" rel=\"noopener\">Form MSC-3<\/a>. This form requires less detailed information compared to the annual returns filed by active companies, reducing the administrative burden on business owners.<\/li>\n<\/ol>\n<p id=\"\">By weighing the <strong id=\"\">benefits of dormant company <\/strong>status against the specific needs and goals of their business, entrepreneurs can make informed decisions about whether this legal structure is suitable for their situation.<\/p>\n<h2 id=\"\">Mandatory Requirements for Obtaining Dormant Status<\/h2>\n<p id=\"\">To be eligible for <strong id=\"\">dormant company status<\/strong> under Section 455 of the Companies Act 2013, a company must fulfil certain mandatory requirements:<\/p>\n<ol id=\"\">\n<li id=\"\"><strong id=\"\">No Significant Accounting Transactions<\/strong>: The company must not have carried out any significant accounting transactions during the financial year for which dormant status is sought. This excludes transactions related to the allotment of shares, payment of fees to the ROC, and maintenance of the company&#8217;s office and records.<\/li>\n<li id=\"\"><strong id=\"\">No Outstanding Liabilities<\/strong>: The company must not have any outstanding loans, whether secured or unsecured, or any other outstanding liabilities. If there are any outstanding unsecured loans, the company must obtain a no-objection certificate from the lenders before applying for dormant status.<\/li>\n<li id=\"\"><strong id=\"\">No Pending Regulatory Actions<\/strong>: There should be no pending inspections, inquiries, or investigations against the company by any regulatory authorities. Additionally, no prosecution proceedings should be initiated against the company under any law.<\/li>\n<li id=\"\"><strong id=\"\">Up-to-date Statutory Filings<\/strong>: The company must have filed all its pending returns, including annual returns and financial statements, with the ROC before applying for dormant status.<\/li>\n<li id=\"\"><strong id=\"\">Shareholder Approval<\/strong>: The company must obtain approval from its shareholders through a special resolution passed at a general meeting. Alternatively, the company can obtain the consent of at least 3\/4th of its shareholders by value through a written resolution.<\/li>\n<\/ol>\n<h2 id=\"\">How to File for Dormant Status: A Step-By-Step Guide<\/h2>\n<p id=\"\">Filing for <strong id=\"\">dormant company status<\/strong> involves a series of steps that must be followed in accordance with the provisions of the Companies Act 2013:<\/p>\n<ol id=\"\">\n<li id=\"\"><strong id=\"\">Convene a Board Meeting<\/strong>: The company&#8217;s board of directors must convene a meeting to discuss and approve the proposal for obtaining dormant status. The board resolution should authorise the filing of the necessary application and documents with the ROC.<\/li>\n<li id=\"\"><strong id=\"\">Obtain Shareholder Approval<\/strong>: The company must obtain approval from its shareholders either through a special resolution passed at a general meeting or through the written consent of at least 3\/4th of the shareholders by value.<\/li>\n<li id=\"\"><strong id=\"\">Prepare the Statement of Affairs<\/strong>: The company must prepare a statement of affairs, including a balance sheet and profit and loss account, as of the date of the application for dormant status. This statement should be verified by an affidavit from the company&#8217;s directors.<\/li>\n<li id=\"\"><strong id=\"\">File Form MSC-1<\/strong>: The company must file Form MSC-1 with the ROC, along with the necessary supporting documents, including the board resolution, shareholder approval, statement of affairs, and any other relevant documents as specified in the Companies Act 2013.<\/li>\n<li id=\"\"><strong id=\"\">Pay the Prescribed Fees<\/strong>: The company must pay the prescribed fees for filing Form MSC-1, as specified in the Companies (Registration Offices and Fees) Rules, 2014.<\/li>\n<li id=\"\"><strong id=\"\">Obtain Certificate of Dormant Status<\/strong>: Upon verification of the application and supporting documents, the ROC will issue a certificate of dormant status to the company in Form MSC-2.<\/li>\n<\/ol>\n<p id=\"\">It is important to note that the entire process of filing for <strong id=\"\">dormant company status<\/strong> must be completed within 30 days of obtaining shareholder approval. Companies should seek the assistance of a qualified professional, such as a company secretary or chartered accountant, to ensure compliance with the prescribed procedures and timelines.<\/p>\n<h2 id=\"\">ROC Forms for Registering Dormant Company<\/h2>\n<div data-rt-embed-type='true'>\n<table>\n<thead>\n<tr>\n<th>Form Name<\/th>\n<th>Purpose<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Form MSC-1<\/td>\n<td>Application for obtaining dormant company status<\/td>\n<\/tr>\n<tr>\n<td>Form MSC-3<\/td>\n<td>Return of dormant companies<\/td>\n<\/tr>\n<tr>\n<td>Form MSC-4<\/td>\n<td>Application for seeking the status of an active company<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<ul id=\"\">\n<li id=\"\"><strong id=\"\">Form MSC-1<\/strong>: This form is used to apply for obtaining <strong id=\"\">dormant company status<\/strong>. It must be filed with the ROC within 30 days of obtaining shareholder approval. The form requires details such as the company&#8217;s name, registered office address, directors&#8217; particulars, and the reasons for seeking dormant status.<\/li>\n<li id=\"\"><strong id=\"\">Form MSC-3<\/strong>: This form is used to file the annual return of a <strong id=\"\">dormant company<\/strong>. It must be filed within 30 days from the end of each financial year. The form requires details such as the company&#8217;s financial position, shareholding pattern, and any changes in the directors&#8217; or registered office address.<\/li>\n<li id=\"\"><a id=\"\" href=\"https:\/\/www.mca.gov.in\/MCA21\/dca\/help\/instructionkit\/NCA\/Form_MSC-1_help.pdf\" target=\"_blank\" rel=\"noopener\"><strong id=\"\">Form MSC-4<\/strong><\/a>: This form is used to apply for seeking the status of an active company. It must be filed with the ROC when a dormant company wants to commence business operations. The form requires details such as the company&#8217;s name, registered office address, and the reasons for seeking active status.<\/li>\n<\/ul>\n<h2 id=\"\">Annual Compliance for Dormant Company<\/h2>\n<p id=\"\">While <strong id=\"\">dormant companies<\/strong> enjoy certain relaxations under the Companies Act 2013, they are still required to fulfil essential annual compliance tasks in four key areas:<\/p>\n<ol id=\"\">\n<li id=\"\"><strong id=\"\">Accounting and Financial Statements<\/strong>: Dormant companies must maintain proper books of accounts and prepare financial statements, including a balance sheet and profit and loss account, for each financial year. These financial statements must be approved by the board of directors and presented at the annual general meeting.<\/li>\n<li id=\"\"><strong id=\"\">Statutory Audit<\/strong>: Dormant companies are required to appoint a statutory auditor to conduct an audit of their financial statements. However, dormant companies are exempt from the requirement of auditor rotation, which is mandatory for active companies.<\/li>\n<li id=\"\"><strong id=\"\">Tax Return Filings<\/strong>: Dormant companies must file their income tax returns annually, even if they have not generated any income during the financial year. They are also required to comply with other applicable tax laws, such as the Goods and Services Tax (GST) and Tax Deducted at Source (TDS) provisions.<\/li>\n<li id=\"\"><strong id=\"\">ROC Filings<\/strong>: Dormant companies must file an annual return in Form MSC-3 with the ROC within 30 days from the end of each financial year. This form requires details such as the company&#8217;s financial position, shareholding pattern, and any changes in the directors&#8217; or registered office address.<\/li>\n<\/ol>\n<div data-rt-embed-type='true'>\n<table>\n<thead>\n<tr>\n<th>Compliance Requirement<\/th>\n<th>Frequency<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Board Meetings<\/td>\n<td>Twice a year<\/td>\n<\/tr>\n<tr>\n<td>Annual General Meeting<\/td>\n<td>Once a year<\/td>\n<\/tr>\n<tr>\n<td>Financial Statements<\/td>\n<td>Annually<\/td>\n<\/tr>\n<tr>\n<td>Statutory Audit<\/td>\n<td>Annually<\/td>\n<\/tr>\n<tr>\n<td>Income Tax Return Filing<\/td>\n<td>Annually<\/td>\n<\/tr>\n<tr>\n<td>Form MSC-3 Filing<\/td>\n<td>Annually<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p id=\"\">By fulfilling these annual compliance requirements, <strong id=\"\">dormant companies<\/strong> can ensure that they remain in good standing with the regulatory authorities and avoid any penalties or legal consequences.<\/p>\n<h2 id=\"\">Reactivation of a Dormant Company<\/h2>\n<p id=\"\">A <strong id=\"\">dormant company<\/strong> can be reactivated and commence business operations by following the prescribed procedure under the Companies Act 2013:<\/p>\n<ol id=\"\">\n<li id=\"\"><strong id=\"\">Convene a Board Meeting<\/strong>: The company&#8217;s board of directors must convene a meeting to discuss and approve the proposal for reactivating the company. The board resolution should authorise the filing of the necessary application and documents with the ROC.<\/li>\n<li id=\"\"><strong id=\"\">File Form MSC-4<\/strong>: The company must file Form MSC-4 with the ROC, along with the necessary supporting documents, including the board resolution and any other relevant documents as specified in the Companies Act 2013.<\/li>\n<li id=\"\"><strong id=\"\">Pay the Prescribed Fees<\/strong>: The company must pay the prescribed fees for filing Form MSC-4, as specified in the Companies (Registration Offices and Fees) Rules, 2014.<\/li>\n<li id=\"\"><strong id=\"\">Obtain Certificate of Active Status<\/strong>: Upon verification of the application and supporting documents, the ROC will issue a certificate of active status to the company in Form MSC-5.<\/li>\n<\/ol>\n<p id=\"\">Once the company has obtained the certificate of active status, it can commence business operations and is required to comply with all the provisions of the Companies Act 2013 applicable to active companies, including regular compliance requirements such as holding board meetings, filing annual returns, and appointing auditors.<\/p>\n<h2 id=\"\">Conclusion<\/h2>\n<p id=\"\">Dormant company under Section 455 of the Companies Act 2013 is a strategic tool for businesses to preserve their legal identity while suspending operations. It allows companies to protect their brand name, reduce compliance costs, and maintain flexibility for future ventures. To benefit from this status, businesses must meet eligibility criteria and comply with statutory requirements. Seeking professional assistance is advisable to navigate the process effectively and avoid legal issues. This approach is ideal for future projects, asset holding, or temporary business pauses, offering a cost-effective solution for maintaining legal existence.<\/p>\n<h2 id=\"\">Frequently Asked Questions<\/h2>\n","protected":false},"excerpt":{"rendered":"<p>Learn the meaning of a dormant company under Section 455 of the Companies Act, 2013. Understand its eligibility, benefits, compliance requirements, and how to obtain dormant status in India.<\/p>\n","protected":false},"author":1,"featured_media":835,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-834","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"_links":{"self":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts\/834","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/comments?post=834"}],"version-history":[{"count":1,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts\/834\/revisions"}],"predecessor-version":[{"id":1234,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts\/834\/revisions\/1234"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/media\/835"}],"wp:attachment":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/media?parent=834"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/categories?post=834"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/tags?post=834"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}