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Overview

Dormant Company Compliance

A Dormant Company is a company that is inactive or not carrying out significant business activities. Under the Companies Act, 2013, such companies can apply for dormant status with the Registrar of Companies (ROC) and are subject to relaxed compliance requirements. Dormant status is ideal for entities formed for future projects or those temporarily ceasing operations.

A dormant company allows businesses to retain legal status while minimizing compliance requirements until operations resume. This status is particularly beneficial for companies holding assets or intellectual property but not engaging in active trade.

Importance

1. Cost Savings : Reduces compliance costs compared to active companies.

2. Asset Protection : Retains legal existence to safeguard assets or IP.

3. Ease of Revival : Allows resumption of business operations when required.

4. Regulatory Compliance : Avoids penalties for non-compliance as an active company.

5. Tax and Statutory Benefits : Ensures proper status under applicable tax laws.

Applicability

1. Private Limited Companies Seeking Growth : Businesses not yet operational but requiring legal existence.

2. Asset-Holding Companies : Companies holding real estate or intellectual property.

3. Temporarily Inactive Companies : Companies ceasing operations temporarily due to market conditions.

4. Inactive Companies : Companies with no significant financial transactions for two consecutive years.

Key Compliance Requirements

1. Application for Dormant Status : File Form MSC-1 with the ROC to obtain dormant status.

2. Minimum Directors : Ensure at least two directors for private companies and three for public companies.

3. Annual Compliance Filing : File Form MSC-3 (annual return for dormant companies) annually.

4. Regular Board Meetings : Conduct at least one board meeting in a financial year.

5. Renewal of Dormant Status : Maintain dormant status by adhering to filing requirements and avoiding defaults.

6. Reactivation of Dormant Company : File Form MSC-4 to revert to active status.


Documents Required



Features

Features & Benefits of Dormant Company Compliance

Relaxed Compliance Requirements
Limited filing and compliance compared to active companies.
Prev Next
Cost-Effective
Reduces compliance costs significantly.
Prev Next
Asset Safeguarding
Retains legal status to protect assets and intellectual property.
Prev Next
Revival Flexibility
Allows easy reactivation to active status when required.
Prev Next
Single Annual Filing
Simplified reporting through Form MSC-3.
Prev Next

Dormant Company Compliance

Board Meeting Requirement
Only one board meeting per financial year is mandatory.
Prev Next
Statutory Protection
Ensures compliance with the Companies Act while inactive.
Prev Next
Retention of Name
Protects the company name during dormancy.
Prev Next
ROC Oversight
Continued monitoring by the Registrar ensures compliance.
Prev Next
Avoids Penalties
Prevents fines associated with non-compliance as an active company.
Prev Next


Comparison with Related Services

Feature Active Company Dormant Company Company Closure
Compliance Burden High Low None
Annual Filing Multiple Filings MSC-3 Only NA
Legal Status Retention Yes Yes No
Ease of Revival Not Applicable Simple (Form MSC-4) New Incorporation Required


Frequently Asked Questions

What is a dormant company?

A dormant company is one that is inactive and not carrying out significant financial transactions but maintains its legal status under the Companies Act, 2013.

Can any company apply for dormant status?

Yes, any company that is inactive or formed for future projects can apply, provided it meets the conditions specified under Section 455 of the Companies Act, 2013.

What transactions are considered significant?

Significant transactions include purchases, sales, borrowings, and investments, among others. Routine filings and statutory payments are not considered significant.

What is Form MSC-3?

Form MSC-3 is the annual return filed by dormant companies, detailing compliance and financial standing.

How can a dormant company be reactivated?

A dormant company can file Form MSC-4 with the ROC to apply for active status.

What are the penalties for non-compliance as a dormant company?

Failure to comply with annual filing requirements can result in revocation of dormant status and penalties for non-compliance under the Companies Act.

Dormant Company

Overview

Dormant Company Compliance

A Dormant Company is a company that is inactive or not carrying out significant business activities. Under the Companies Act, 2013, such companies can apply for dormant status with the Registrar of Companies (ROC) and are subject to relaxed compliance requirements. Dormant status is ideal for entities formed for future projects or those temporarily ceasing operations.

A dormant company allows businesses to retain legal status while minimizing compliance requirements until operations resume. This status is particularly beneficial for companies holding assets or intellectual property but not engaging in active trade.

Importance

1. Cost Savings : Reduces compliance costs compared to active companies.

2. Asset Protection : Retains legal existence to safeguard assets or IP.

3. Ease of Revival : Allows resumption of business operations when required.

4. Regulatory Compliance : Avoids penalties for non-compliance as an active company.

5. Tax and Statutory Benefits : Ensures proper status under applicable tax laws.

Applicability

1. Private Limited Companies Seeking Growth : Businesses not yet operational but requiring legal existence.

2. Asset-Holding Companies : Companies holding real estate or intellectual property.

3. Temporarily Inactive Companies : Companies ceasing operations temporarily due to market conditions.

4. Inactive Companies : Companies with no significant financial transactions for two consecutive years.

Key Compliance Requirements

1. Application for Dormant Status : File Form MSC-1 with the ROC to obtain dormant status.

2. Minimum Directors : Ensure at least two directors for private companies and three for public companies.

3. Annual Compliance Filing : File Form MSC-3 (annual return for dormant companies) annually.

4. Regular Board Meetings : Conduct at least one board meeting in a financial year.

5. Renewal of Dormant Status : Maintain dormant status by adhering to filing requirements and avoiding defaults.

6. Reactivation of Dormant Company : File Form MSC-4 to revert to active status.


Documents Required



Features

Features & Benefits of Dormant Company Compliance

Relaxed Compliance Requirements

Limited filing and compliance compared to active companies.

Cost-Effective

Reduces compliance costs significantly.

Asset Safeguarding

Retains legal status to protect assets and intellectual property.

Revival Flexibility

Allows easy reactivation to active status when required.

Single Annual Filing

Simplified reporting through Form MSC-3.

Board Meeting Requirement

Only one board meeting per financial year is mandatory.

Statutory Protection

Ensures compliance with the Companies Act while inactive.

Retention of Name

Protects the company name during dormancy.

ROC Oversight

Continued monitoring by the Registrar ensures compliance.

Avoids Penalties

Prevents fines associated with non-compliance as an active company.



Comparison with Related Services

Feature Active Company Dormant Company Company Closure
Compliance Burden High Low None
Annual Filing Multiple Filings MSC-3 Only NA
Legal Status Retention Yes Yes No
Ease of Revival Not Applicable Simple (Form MSC-4) New Incorporation Required


Frequently Asked Questions

What is a dormant company?

A dormant company is one that is inactive and not carrying out significant financial transactions but maintains its legal status under the Companies Act, 2013.

Can any company apply for dormant status?

Yes, any company that is inactive or formed for future projects can apply, provided it meets the conditions specified under Section 455 of the Companies Act, 2013.

What transactions are considered significant?

Significant transactions include purchases, sales, borrowings, and investments, among others. Routine filings and statutory payments are not considered significant.

What is Form MSC-3?

Form MSC-3 is the annual return filed by dormant companies, detailing compliance and financial standing.

How can a dormant company be reactivated?

A dormant company can file Form MSC-4 with the ROC to apply for active status.

What are the penalties for non-compliance as a dormant company?

Failure to comply with annual filing requirements can result in revocation of dormant status and penalties for non-compliance under the Companies Act.

Related Services