Introduction
Transforming an active company into a dormant company can be a strategic move for businesses that are currently inactive, holding assets or intellectual property, or planning future operations. This status allows companies to maintain their legal existence while minimizing compliance obligations.
Advantages of Dormant Company Status
Legal Continuity
The company remains a valid legal entity, preserving its name and structure for future use.
Reduced Compliance Burden
Dormant companies are subject to fewer compliance requirements, leading to cost savings.
Asset Protection
Ideal for holding assets or intellectual property without engaging in active business operations.
Future Readiness
Easily reactivated when business operations are set to commence.
Eligibility Criteria
- The company has been inactive or has not carried out any business activities for the past two years.
- No significant accounting transactions have occurred during this period.
- The company has not filed annual returns with the Registrar of Companies (ROC) for the past two years.
Mandatory Requirements
1-Minimum Number of Directors
- Public Limited Company: Minimum 3 Directors
- Private Limited Company: Minimum 2 Directors
- One Person Company (OPC): Minimum 1 Director
2-No Outstanding Loans
- If there are outstanding loans, obtain consent from lenders before applying for dormant status.
Step-by-Step Process to Obtain Dormant Status
1. Board Resolution
Convene a Board Meeting to pass a resolution approving the application for dormant status.
2. Shareholder Approval
Obtain consent from at least 75% of shareholders through a special resolution passed in an Extraordinary General Meeting (EGM).
3. Filing with ROC
Submit Form MGT-14 along with the special resolution and then file Form MSC-1 to the ROC.
4. ROC Approval
Upon satisfaction, the ROC will issue a certificate granting dormant status.
Compliance for Dormant Companies
- File a “Return of Dormant Company” annually in Form MSC-3.
- Hold at least two Board Meetings in a financial year.
- Ensure the company does not engage in significant accounting transactions.
Reviving a Dormant Company
To reactivate a dormant company, file Form MSC-4 with the ROC. Upon approval, the company regains active status and must comply with all regular compliance requirements.
Conclusion
For detailed guidance and assistance in converting your company to dormant status, consult with professional service providers specializing in corporate compliance.