The concept of a dormant company is a concept recently introduced in the Companies Act 2013, which was not previously in the 1956 Act. The Indian legislature seems to have borrowed mainly from the legal provisions of the company operating in India. However, there are some important differences such as the length of dormant, etc. In line with the policies applicable to Indian investors, the provision for non-performing companies has been reflected in the light of promoting and simplifying the process of incorporation and operation of the company.
Dormant Companies
Companies Act, 2013 Act has identified a new set of companies called unemployed companies. In terms of Section 455 (1) Where a company is formed and registered under this act of a future project or for assets or intellectual property and does not have significant accounting transactions, such company or non-performing company may apply to the Registrar for the prescribed method of acquiring dormant company.
Getting Dormant Status for Company
The Company may be promoted as a dormant Company According to:
Suo Moto Application: A company that meets the above criteria may apply Suo-moto to the Registrar of Companies in the form of ‘Dormant Company’ on Form MSC-1 and the fees payable to companies (Registration Offices and Fees Regulations, 2014 after complying with the provisions of Company Act 3 2014.
Loss by ROC: In the event that a company has not completed the financial statements or annual returns for 2 consecutive years, the Registrar may issue a notice to that company and enter the company’s name in the register kept for Unemployed Companies.
Eligibility:
That Company will be able to apply for the status of an Unemployed Company if the following 8 conditions are satisfied:
(i) No inspections, investigations, or investigations have been ordered/taken/performed for the company.
(ii) No prosecution has been instituted against the company under any law.
(iii) The Company does not have arrears of public funds and does not pay taxes on it and its interest.
(iv) The Company does not have outstanding loans whether they are secured or unsecured.
Subject to any outstanding loan, the company may apply after obtaining the lender’s approval and filing the same on the MSC-1 form.
(v) There is no dispute in the management/administration of the company and a certificate in this regard is attached to the MSC-1 form.
(vi) The Company does not have any official fees, taxes, duties, or other charges payable to any CG or SG or local authorities, etc.
(vii) The company did not fail to pay employees’ salaries.
(viii) The security of any company is not registered on any stock exchange within or outside India.
Therefore, the listed Company cannot apply under this section.
The registrar after processing the application will approve the status of the Unemployed Company to the applicant in the form of MSC-2.
Clarification Appended to section 455(1)
The inactive company ” means a company that has not carried on any business or activity, or has not made any significant financial transactions during the past two financial years, or has not completed financial statements and annual returns during the past two financial years.
Important financial activity ’’ means any transaction other than
Payment of company fees by the Registrar;
Payments made by it for the purposes of this Act or any other law;
Allocation of shares to meet the requirements of this Act; and
Fees payable for the maintenance of its office and records.
Status of the Company as Dormant
1. First, you must convene a board meeting to set a time and place for the regular meeting of the members to pass a special resolution (at least 3/4 per value). The director may make a general request for a dormant position with the ROC at this board meeting. You must issue a public meeting notice. Also, you should hire a Chartered Accountant or Auditor to issue a certificate to this general meeting.
2. Next, an extraordinary general meeting takes place. After that, a special decision is passed. An exact copy of the individual’s decision and a notice of the extraordinary public meeting with an explanatory statement. This is because the attachment to the e-form MGT-14 is included in the ROC.
3. Next, the company must apply on the MSC-1 form and attach the following attachments to determine the company’s status:
- Certified copy of board decision.
- Certified copy of the special resolution.
- Certificate from the auditor.
- A statement of news, duly approved by the auditor or chartered accountant.
- You must attach a Return Return and Recent Financial Statement forcibly.
- A certificate stating that there is no dispute between management or ownership
- If there is any loan in the company, the lender’s permit must be included
Documents for obtaining a Dormant Company
1. copy of the decision of the board authorizing the implementation of the plan.
2. certified copy of the special order authorizing the acquisition of accommodation, for submission to the clerk on Form MGT-14.
3. Auditor’s Certificate
4. News statement is duly certified by the CA or the company’s auditors
5. approval of the opposition certificate (NOC) from the controlling authority in the event that the company is controlled by that authority
6. latest financial statements and annual company returns are required to attach in the event of a similar filing to the Registrar.
Benefits of Dormant Company
Company Name Protection – Intellectual property owned by a dormant company includes a trademark of a company name. The company name is protected so that others are not allowed to trade under the name of the dormant company.
Future Project – A company may be formed to prepare for a future project. This means the intent of the promoters to trade and therefore to keep the domain name. A good example of this as mentioned in Ramaiya is a company that has acquired a lease but is awaiting further permits before starting a business.
Company History – While this is not the most important benefit, by establishing a company that started and later started a business, it can be said to have been well established since its inception even though it may have started its own business later. It helps the company to show a better image to potential customers and / or lenders.
Conditions should be met by obtaining dormant status
- No inspections, investigations, or investigations should have been ordered or conducted or conducted against the company.
- No prosecution had to be initiated and awaited by the company under any law.
- The Company must not have any public deposits unpaid and must not be liable for payment or interest on it.
- The company should not have any outstanding loans, whether they are secured or unsecured.
- There should be no dispute in the management or ownership of the company and a certificate in this regard must be submitted on Form MSC-1.
- The company should not have any official taxes, fees, duties, etc. Payable to the Central Government or any State Government or local authorities etc.
- The company should not have failed to pay its employees’ salaries.
- Company security should not be listed on any stock exchange within or outside India.
Conclusion
In terms of section 455 of the Companies Act, 2013 Dormant Company is an unemployed company that has not conducted any business or has not made significant financial transactions during the last two financial years.
Such companies may apply to the Registrar for the status of a dormant company. At the same time, the Registrar may and may direct such a company in the case of a dormant company.
Created & Posted By Suraj Kumar
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