Dormant Company Compliance - An Overview:
Dormant company compliance refers to the statutory requirements that a company must continue to follow after obtaining dormant status under the Companies Act, 2013. Although a dormant company generally does not carry on significant business activities, it continues to retain its legal identity and must meet applicable compliance obligations. These include filing the prescribed annual return, maintaining statutory records, conducting the required board meetings and fulfilling applicable financial and regulatory requirements. Proper dormant company compliance in India helps the company maintain its status, avoid penalties and additional fees and remain prepared to resume business activities when required.
What Is a Dormant Company?
A dormant company is a company registered under the Companies Act, 2013, that has been granted dormant status by the Registrar of Companies (ROC). A company may seek dormant status when it is formed for a future project, to hold an asset or intellectual property or when it is temporarily inactive and has no significant accounting transactions. Dormant status allows the company to remain legally registered without being subject to the full range of compliance requirements applicable to an active company. However, a dormant company must still comply with certain statutory requirements, including applicable dormant company annual compliance, annual filings and record-keeping obligations.
When Can a Company Obtain Dormant Status?
A company can apply for dormant status under Section 455 of the Companies Act, 2013, when:
- It is formed for a future project.
- It is created to hold assets or intellectual property.
- It is temporarily inactive and not carrying on significant business activities.
- It has no significant accounting transactions, except those permitted under the applicable rules.
- It intends to retain its legal existence without active business operations.
Why Is Dormant Company Compliance Important?
- Maintains legal status of the company with the ROC.
- Ensures timely MCA filings and statutory compliance.
- Helps avoid penalties and additional filing fees.
- Preserves dormant status as permitted under law.
- Keeps statutory records properly maintained and updated.
- Supports future business plans when the company becomes active.
- Reduces risk of regulatory action for non-compliance.
- Keeps company information updated with the MCA.
- Facilitates conversion to active status when required.
- Ensures ongoing compliance even when the company is not conducting business.
Annual Compliance Requirements for a Dormant Company:
A dormant company is required to meet certain statutory obligations even while it remains inactive. These requirements form an important part of a dormant company's annual compliance.
| Compliance | Form/Requirement | Filling Date/Frequency |
|---|---|---|
| Return of Dormant Company | Form MSC-3 | Due Date for same is 30 April every year |
| Audited Financial Position Statement | Statement of Financial Position (NIL or minimal transactions), audited by a practicing Chartered Accountant | Attached with Form MSC-3 (same deadline: 30 April) |
| Board Resolution (if required) | Certified copy of Board Resolution approving MSC-3 filing | Submitted along with MSC-3 |
| Event-based filings (if applicable) | e.g.- change in directors (DIR-12), return of allotment (PAS-3), etc | As per normal timelines under the Act |
| Board Meeting | At least one meeting in each half of the calendar year | Minimum 90 days gap between meetings |
Timely dormant company compliance filing helps ensure that the company meets its applicable MCA requirements and avoids additional fees, penalties or regulatory issues.
Note: Dormant companies have certain exemptions and relaxed compliance requirements under the Companies Act, 2013 and applicable rules. The exact filing requirements may depend on the company's circumstances.
Documents Required for Dormant Company Compliance:
- Certificate of Incorporation
- Memorandum of Association and Article of Association
- Previous MCA filings
- Financial statements
- Board/shareholder resolutions
- Director details
- Digital Signature Certificate (DSC) of authorized person
- Other supporting documents depending on the compliance filing
Dormant Company Compliance Process:
The dormant company compliance process involves reviewing the company's statutory status, identifying pending requirements, preparing applicable documents and completing the necessary MCA filings.
- Review company status and previous filings.
- Identify pending compliances.
- Prepare financial and statutory records.
- Conduct required board proceedings.
- Prepare applicable MCA forms.
- File the required forms within prescribed timelines.
- Track MCA acknowledgment/approval.
- Maintain an ongoing compliance calendar.
Can a Dormant Company Become Active Again?
Yes, a dormant company can become active again when it is ready to resume business operations. The company can apply to the Registrar of Companies for active status by filing the Form MSC-4 and fulfilling the applicable compliance requirements. Once the ROC approves the application, the company can resume its business activities and will be subject to the compliance requirements applicable to an active company.