Best Practices for Dormant Company Registration – Easy My Tax
If your company is currently inactive and you're looking to reduce ongoing compliance obligations while keeping the business legally registered, converting it into a Dormant Company under the Companies Act, 2013 can be a practical solution. Easy My Tax offers expert support to guide you through this process seamlessly from start to finish.
What is a Dormant Company?
A Dormant Company is a registered entity that is not actively conducting business or engaging in significant financial transactions. Companies often choose dormant status to:
- Hold intellectual property or assets
- Reserve a company name for future projects
- Temporarily pause operations without shutting down the company
This status helps companies maintain their legal existence without going through the full compliance requirements of active businesses.
Why Choose Dormant Status?
Common reasons companies opt for dormant status include:
- Reserving the business name while preparing for a future launch
- Undergoing business restructuring or reorganization
- Temporarily halting operations due to personal or professional reasons
- Holding assets, trademarks, or intellectual property without trading
Key Benefits of Dormant Company Status
- Reduced regulatory and compliance requirements
- Simplified annual return filings
- Exemption from mandatory auditor rotation
- Only one board meeting required every six months
- Ability to reactivate the company when business resumes
- Company name remains protected during the inactive period
Conditions to Qualify for Dormant Status
To be eligible, your company must:
- Have no significant financial transactions in the past two years
- Not be under inspection, inquiry, or investigation
- Not have any outstanding public deposits or unpaid dues
- Have no active legal proceedings regarding ownership or management
- Be unlisted on any stock exchange in India or abroad
- Clear all statutory dues and filings
- Obtain shareholder approval through a special resolution
If the company has outstanding unsecured loans, a no-objection certificate from the lender is required.
Steps to Apply for Dormant Company Status
Step 1: Board Resolution
The Board of Directors must pass a resolution proposing the shift to dormant status and authorize a director to proceed.
Step 2: Shareholder Approval
Conduct an Extraordinary General Meeting (EGM) and pass a special resolution with approval from at least three-fourths of shareholders (by value).
Step 3: File Form MGT-14
Submit the special resolution to the Registrar of Companies (ROC) using Form MGT-14 within 30 days of passing it.
Step 4: File Form MSC-1
Apply for dormant status by submitting Form MSC-1 along with supporting documents:
- Certified true copies of board and shareholder resolutions
- Statement of affairs verified by a Chartered Accountant
- Auditor’s certificate
- NOC from lenders or regulators (if required)
Step 5: Receive Dormant Status Certificate
The ROC will review the application and, if satisfied, issue a certificate in Form MSC-2, confirming dormant status.
Annual Compliance for Dormant Companies
Even as a dormant company, certain compliance requirements must be met:
1. Financial Records
Maintain proper accounting records and prepare financial statements.
2. Statutory Audit
Conduct a statutory audit of financial statements annually, even if no major transactions occurred.
3. Income Tax Filings
File income tax returns annually, along with TDS or GST returns if applicable.
4. Annual ROC Return (Form MSC-3)
File a simplified annual return with audited financials within 30 days of the end of the financial year.
ROC Forms Required
- Form MGT-14: For filing the special resolution
- Form MSC-1: Application to obtain dormant status
- Form MSC-3: Annual return submission for dormant companies
Simplify Dormant Status Filing with Easy My Tax
At Easy My Tax, we help businesses transition to dormant status with expert guidance, accurate documentation, and timely filings. We also manage your ongoing compliance needs, including audits, tax returns, and ROC filings, ensuring full legal adherence with minimal hassle.
Get in touch with Easy My Tax today to streamline your dormant company registration and compliance.
