What is a Dormant Company

Companies Act, 2013 introduces a concept of a dormant company under Section 455.

Section 455 states

Where a company is formed and registered under this Act for a future project or 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 a manner as may be prescribes for obtaining the status of a dormant company.

'inactive company' and 'significant accounting transaction' has been defined as under;

Inactive company

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.

Significant Accounting Transaction

Significant accounting transaction means any transaction other than-
    1. Payment of fees by a company to the registrar.
    2. Payment made by it to fulfill the requirements of this Act or any other law.
    3. Allotment of shares to fulfill the requirements of this Act.
    4. Payment for maintenance of its office and records.

Privileges of a Dormant Company

The privileges and exemptions enjoyed by a dormant company or its advantages over other companies are as follows:

Section 2(40): The financial statement of a dormant company may not include the cash flow                statement.

Section 173(5): A dormant company required to hold at least one board meeting in each half of a calendar year and the gap between the two meeting should not be less than ninety days.

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