Section 455 of Companies Act 2013-Dormant Company status

The main purpose of the revisions to the Companies Act, 1956 was to have a simplified law that would address changes taking place in the national and international context, allow for the adoption of internationally accepted best practices and provide flexibility in responding to ever-changing business models. Also similar to what was introduced in the Companies Act, 2013(herein referred as “Act”) was the concept of Dormant Companies in section 455 of the Act. This article will talk about section 455 of the Companies Act, 2013.

What are Dormant Companies?

In common parlance, the word “Dormant” means to be inactive or to be inoperative. A Dormant company is a great opportunity to start a future project company or to hold intellectual property or assets without accounting transactions. On the other hand, if a company does not submit its annual returns for two consecutive years, the company will be deemed as a Dormant company.

Significant accounting transactions mean transactions other than the basic procedural functions namely company payments to the Registrar and payments to meet the requirements of this Act and any other law, the allocation of shares to meet the requirements of this Act, and payments to maintain office and records.

The company may choose to be Dormant for a variety of reasons, including

• It is possible to register a company as inactive when the owners plan to launch it and want to keep the name.
• If the owners of the company want to restructure it, they can apply for a Dormant condition.
• If the business owner needs to take a long break for reasons such as illness, travel, maternity leave, etc.

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Benefits under Section 455 of the Companies Act, 2013 for Dormant Companies

• A company may be established to prepare for future work. This indicates that the promoters want to trade and therefore maintain the domain name.
• The Company Name Trademark is among the intellectual property owned by an inactive company. Some authorized traders use the name of the sleeping company as it is secure.
• Helps the company to present a positive image to potential buyers and lenders.

Eligibility Criteria for the status of Dormant

• No inspections, investigations, inquiry have been ordered or conducted. Additionally, no criminal cases have been filed or pending before the company in any court of law.
• In the name of an organization, there are no outstanding payments on public deposits or interest.
• A certificate stating that there is no conflict or disagreement between company management and promoters should be included.
• There should be no credit to the company’s employees.
• There should be no loan left, secure or unsecured in the business. If the loan is unsecured, the lender’s consent must be accompanied by a form.
• In the name of the company, there are no tax obligations left to the central government, local governments, or the central government.
• The company should not be listed on the Stock Exchange in India or elsewhere.

Process of registering Dormant Companies in India

• To begin the process, the first thing required is to register a Dormant Company under the Companies Act, 2013. Call a board meeting to arrange a date and venue for an Extraordinary General Meeting (EGM) for members to pass a special resolution (costs at least three-quarters of total value). During this board meeting, the director may submit a general application to the ROC for a state of non-employment. For a public meeting, you must publish a notice. In addition, a Chartered Accountant or Auditor must be appointed who will issue a certificate to the general meeting.
• After that, there is an Extraordinary General Assembly. Thereafter, a special resolution was adopted. A true copy of the individual’s decision, as well as notice of the informal public meeting. This is because the ROC receives the email attachment of the MGT-14 form.
• To obtain a company sleep deprivation, the company must first submit an MSC-1 form with the attached attachment:

• A certified copy of the decision of the same board.
• For a special decision, an accurate certified copy is required.
• Auditor’s signature on the certificate.
• Updated newsletter and approved by the auditor or chartered accountant.
• Annual Return and the most recent Financial Statement required attachment.
• A certificate stating no disagreement between owners and management.
• If there is a debt remaining in the name of the company, the lender’s permit must be extended.

Final words

In terms of section 455 of the Companies Act, 2013 Dormant Company is an unemployed company that has not conducted business or made significant financial transactions during the last two financial years. Such companies may apply to the Registrar for a status of an inactive company. At the same time, the Registrar may also direct such a company in the case of an inactive company. Hope you got all the necessary details about section 455 of the Companies Act, 2013.