DORMANT COMPANY – A NEW ASSET SHIELDING CONCEPT UNDER COMPANIES ACT 2013

DORMANT COMPANY – A NEW ASSET SHIELDING CONCEPT UNDER COMPANIES ACT 2013

A Dormant Company offers excellent advantage to promoters who wants t to hold an asset or intellectual property under the corporate shield for its usage at a later stage . For instant , if a promoter wants to buy lands now for its future project at a comparatively lesser price , he may do the same through dormant company so that he use the land for its project latter. Thus , dormant company status is a new phenomenon in the Companies Act 2013 and is an excellent tool for keeping assets in the company for its future usage. A dormant company may be either a public company or a private company or a one person company.

According to Section 455 of the Companies Act 2013, where a company is formed and registered under this Act for a future projector to hold an asset or intellectual property and has no significant accounting transaction,such a company or an inactive company may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company.

According to section 455 of Companies Act 2013, “inactive company” means a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years;

According to section 455 of Companies Act 2013,significant accounting transaction” means any transaction other than—

(a) payment of fees by a company to the Registrar;

(b) payments made by it to fulfil the requirements of this Act or any other law;

(c) allotment of shares to fulfil the requirements of this Act; and

(d) payments for maintenance of its office and records.

In case of a company which has not filed financial statements or annual returns for two financial years consecutively, the Registrar of companies shall issue a notice , suo motto , to that company and enter the name of such company in the register maintained for dormant companies.

A dormant company shall have such minimum number of directors, file such documents and pay such annual fee as may be prescribed to the Registrar to retain its dormant status in the register and may become an active company on an application made in this behalf accompanied by such documents and fee as may be prescribed.

A Dormant Company need not enclose cash flow statements in its annual accounts.

A Dormant Company is required to convene at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days:

As per section 248 of the Companies Act 2013, the Registrar of Companies may remove the name of a company from the register of companies , if a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455.

As per draft rules , for the purposes of sub-section (1) of section 455, a company may make an application in Form No. 29.2 along with such fee as provided in Annexure ‘B’ to the Registrar for obtaining the status of a Dormant Company in accordance with the provisions of section 455 after passing a special resolution to this effect in the general meeting of the company.

The Registrar shall, after considering the application filed in Form No. 29.2, issue a certificate in Form No. 29.3 allowing the status of a Dormant Company to the applicant.

For the purposes of sub-section (5) of section 455, a dormant company shall have a minimum number of three directors in case of a public company, two directors in case of a private company and one director in case of a One Person Company:

Thus , one person company (OPC) can also be registered as a dormant company under section 455.

For the purposes of sub-section (5) of section 455, a dormant company shall file a declaration annually in Form No. 29.4 along with such annual fee as provided in Annexure ‘B’ within thirty days from the end of each financial year.

Application under sub-section (5) of section 455 for obtaining the status of an active company from that of dormant company shall be made in Form No. 29.5 along with such fee as may be provided in Annexure ‘B’ and shall be accompanied by a return in Form No. 29.4 in respect of the financial year in which the application for obtaining the status of an active company is being filed.