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Dormant Status or Inactive Company Status

Filing of MGT-14

Filing of MSC-1

Preparation of necessary documents and completing compliances as per Secretarial standards

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    Contents

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    Introduction:

    Under Section 455(1) of the Companies Act, 2013, a company that has been formed but has no significant accounting transactions or operations may apply for the status of a dormant company. Obtaining dormant company status provides various benefits and simplifies compliance requirements. This guide aims to provide valuable insights into the process of obtaining dormant company status, mandatory requirements, the application procedure, issuance of the certificate, and the ongoing compliance obligations

    List of Documents Required

    How Does It Works?

    Form Submission

    Callback From Our Team

    Final Quote And Payment

    Document Submission

    Filing of MSC-1 and MGT-14 (5 Days)

    Issuance of Dormancy Certificate

    Benefits of Obtaining Dormant Company Status:

    Obtaining dormant company status offers several advantages, including:

    Reduced Compliance Burden: Dormant companies have simplified compliance requirements, reducing the administrative burden on the company and its directors.

    Preserved Company Structure: The dormant status allows companies to preserve their corporate structure, making it easier to reactivate operations in the future.

    Cost Savings: Dormant companies can save costs by avoiding unnecessary compliance expenses associated with active companies.

    Legal Protection: The dormant status provides legal protection and shields the company from potential disputes and investigations during the inactive period.

    Mandatory Requirements for Obtaining Dormant Company Status:

    To obtain dormant company status, certain mandatory requirements must be fulfilled, including:

    Minimum Number of Directors: The company must have the minimum number of directors as specified in Section 455(5) of the Act and Rule 6 of the Companies (Miscellaneous) Rules, 2014

    Special Resolution or Shareholder Consent: The company must pass a special resolution in a general meeting or obtain the consent of at least 3/4th of the shareholders (in value) to obtain dormant status.

    Fulfillment of Conditions: The application for dormant status must fulfill various conditions specified in the Companies (Miscellaneous) Rules, 2014, such as no pending inspections, prosecutions, disputes, outstanding loans, or statutory taxes.

    Procedure for Obtaining Dormant Company Status:

    The process of obtaining dormant company status involves the following steps:

    • Convene a Board Meeting: Hold a board meeting as per Section 173 of the Act to discuss and pass a resolution for obtaining dormant status.
    • Convene a General Meeting: Call an extraordinary general meeting (EGM) to obtain shareholder approval for obtaining dormant status.
    • File Form MGT-14 with ROC: File a copy of the special resolution with the Registrar of Companies (ROC) within 30 days of passing the resolution.
    • Application for Dormant Company Status: Prepare and submit an application in Form MSC-1 to the Registrar, accompanied by relevant documents such as certified resolutions, auditor’s certificate, statement of affairs, and necessary approvals.
    • Issuance of Dormant Company Certificate: Upon review of the application, the Registrar will grant dormant company status and issue a certificate in Form MSC-2.
    • Ongoing Compliance: File an annual return of the dormant company in Form MSC-3 within 30 days from the end of each financial year, along with audited financial statements and other required documents.

    Conclusion:

    Obtaining dormant company status provides numerous benefits, including reduced compliance burden, cost savings, and legal protection. By following the mandatory requirements and adhering to the prescribed procedure, companies can successfully obtain dormant status and avail of the associated advantages. For reliable compliance services and assistance with applying for dormant status, please contact Instafiling. Our expert team is dedicated to delivering tailored solutions and ensuring a seamless compliance process for your business.

    FAQs

    Inactive Company means a company

    (i) which has not been carrying on any business or operation, or 

    (ii) which has not made any significant accounting transaction during the last two financial years, or 

    (iii) which has not filed financial statements and annual returns during the last two financial years.

     

    An Inactive company can apply for the Dormant status.

    Inactive Company means a company

    (i) which has not been carrying on any business or operation, or 

    (ii) which has not made any significant accounting transaction during the last two financial years, or 

    (iii) which has not filed financial statements and annual returns during the last two financial years.

    Dormant status for a company refers to a legal classification given to a company that is not actively trading or carrying out any significant business operations. When a company is dormant, it means it is inactive and not engaged in any substantial business activities, such as generating income, entering into contracts, or conducting regular operations.

    The Registrar of Companies grants the status of dormant company.

    To activate a dormant company, you need to file an application in Form MSC-4 accompanied by a return in Form MSC-3 for the financial year in which the application for obtaining the status of an active company is being filed to the Registrar of companies.

    The Registrar upon verification and consideration of the application will issue a certificate in Form MSC-5 allowing the status of an active company to the applicant.

    Companies. 

    The name of the Company can be inactive due to following reasons:

    (i) The Company failed to carry on any business or operation; or 

    (ii) The Company has not made any significant accounting transaction during the last two financial years; or 

    (iii) The Company has not filed its financial statements and annual returns during the last two financial years.

    Yes, a dormant company can trade again after obtaining the status of an Active company.

    A Company can apply for the status of dormancy by filing an application in Form MSC-1 to the Registrar of Companies. 

     

    The Registrar after considering the application will issue a certificate in Form MSC-2 allowing the status of a dormant company to the applicant.

    Dormant status can provide certain benefits to a company as mentioned below:

     

    Reduced Compliance Burden: A dormant company generally has fewer compliance obligations compared to an active trading company. This can result in reduced administrative work and associated costs. 

     

    Preservation of Corporate Structure: Keeping a company in a dormant state allows for the preservation of its legal structure, such as the company name, registration, and intellectual property rights. This can be advantageous if there are plans to reactivate the company in the future or if the company holds valuable assets or intellectual property.

     

    Flexibility for Future Business Activities: Maintaining a dormant company can provide flexibility for future business endeavors. Instead of setting up a new company, reactivating a dormant company allows for a streamlined process, as the legal entity already exists. This can save time, effort, and costs when resuming operations.

     

    Brand Protection: By keeping a company dormant, the business can retain its brand and prevent others from registering a similar name or trademark. This safeguards the company’s reputation and prevents potential infringement issues.

    Inactive business or company can apply either apply for closure or for the status of Dormancy to reduce the compliance burden and administrative costs.

    The Company can check the status under the master data on the www.mca.gov.in by filling in the CIN details of the Company.

    No, audit is not compulsory for Dormant companies but a statement of accounts as certified by the practicing Chartered Accountant is required to be filed with return of dormant companies in Form MSC-3.

    Dormant Companies doesn’t require to file its financial statements or Annual return.

    However, a statement of accounts as certified by the practicing Chartered Accountant is required to be filed with return of dormant companies in Form MSC-3.

    The dormant company shall file its annual return in Form MSC-3 every year within 30 days from end of financial year i.e by 30th April.

    Further, a dormant company shall also comply with the minimum director requirements i.e 1 (one) in case of OPC, 2 (two) in case of Private Company and 3 (three) in case of Public Company.

    Yes, a dormant company can have a bank account.

    The cost of compliance in a dormant company is very less as compared to an active company as only return of dormancy is required to be filed in Form MSC-3.  

    Any inactive company or a company formed and registered under this Act for a future project or to hold an asset or intellectual property and has no significant accounting transactions can file for the status of dormant Company.

    When the company is formed for any future projects or if it is an inactive company, at that time an application seeking the status of dormancy can be filed.

    Yes, to make a company dormant some potential costs are associated with it which includes filing fees, professional fees and ongoing compliance costs.

    Yes, if a company is being incorporated for any future projects then dormancy status can be filed after incorporation.

    A dormant company needs to file its annual return or a return of dormancy in Form MSC-3.

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