DORMANT COMPANIES – PROVISION UNDER THE NEW COMPANIES ACT, 2013
Sometimes Companies are getting registered to hold immoveable properties or an Intellectual properties without having any business activity for a few years. These Companies later on either get revived or merged with some other Company/Companies depending upon the need of the hour. Some promoters register companies with an intention to start its business activities after a few years due to various reasons. The Government with an intention to have minimum secretarial and Company Law compliances for these type of Companies have added a new provision under the new Act. Section 255 read with the Companies (Miscellaneous )Rules, 2014 have been introduced for the first time to take care of these categories of Companies. This Article is meant to analyze in detail the eligibility norms for Dormant Companies and procedures to be followed by a Company to acquire Dormant Status and limited exemptions given to Dormant Companies and how far it is going to be useful.
ELIGIBILITY CRITERIA FOR TWO CATEGORIES OF COMPANIES
Under Section 455 of the Companies Act , 2013
i. New Companies registered under the Companies Act, 2013 after 1st April, 2014 registered with the following purpose
- To hold an Asset or an Intellectual Property and
- has no significant Accounting transactions
ii. An inactive Company registered even prior to 31.3.2014 and
- which has not been carrying any business or operations or
- has not made significant Accounting transaction for the last two financial years or
iii has not filed financial statements and Annual return during the last two financial years are eligible to apply for a Dormant Status.
However these companies should also comply with the following conditions laid down under Rule 3 of the Companies (Miscellaneous) Rules, 2014
There shall be
a.no inspection, inquiry or investigation has been ordered or taken up or carried out against the company;
b. no prosecution has been initiated and pending against the company under any law;
c.the company is neither having any public deposits which are outstanding nor the company is in default in payment thereof or interest thereon;
d.the company is not having any outstanding loan, whether secured or unsecured:
Provided that if there is any outstanding unsecured loan, the company may apply under this rule after obtaining concurrence of the lender and enclosing the same with Form MSC-1 ;
e.there is no dispute in the management or ownership of the company and a certificate in this regard is enclosed with Form MSC-1;
f.the company does not have any outstanding statutory taxes, dues, duties etc. payable to the Central Government or any State Government or local authorities etc.;
g.the company has not defaulted in the payment of workmen’s dues;
h.the securities of the company are not listed on any stock exchange within or outside India.
Note: I feel there is small error in drafting Section 455. I do not know why MCA has used the word ‘or’. My interpretation would be that if an inactive Company has made significant Accounting transactions, but has not carried on any business or operations it would still become eligible to acquire dormant status just because it has not filed its financials for the last years as the word “or” is used.
In short, all new Companies registered after 1st April, 2014 and all inactive companies registered even prior to 31-3-2014 are eligible to apply for Dormant Status subject to certain conditions.
These two categories of Companies have one thing in common. These companies should not have made any significant Accounting transactions. All transaction other than following transactions are considered as significant Accounting transactions:
- a. Payment of filing fees to ROC.
- b. Payments to fulfill the requirements of the Act or any other Law
- c. Allotment of shares
- d. Payment of maintenance of its office and records.
Inactive Companies should not have made significant accounting transactions for the last two financial years
