Dormant Company

Introduction 

Section 455 of the Companies Act, 2013 provides a legislative mechanism for companies that have been formed for a future project, or that hold an asset or intellectual property, and have no significant accounting transaction, to obtain the status of a dormant company from the Registrar of Companies. 

• Similarly, an inactive company — one that has neither carried on any business or operation nor made any significant accounting transaction during the last two financial years, or that has not filed financial statements and annual returns during the last two financial years — is also eligible to apply for dormant status. 
• This provision enables such companies to remain on the register in a legally recognised but operationally suspended state, thereby reducing their compliance burden while preserving their legal existence.

Key Definitions 

The Explanation to Section 455 provides two crucial definitions: 

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 means any transaction other than — 

• payment of fees by a company to the Registrar; 
• payments made to fulfil requirements of the Companies Act or any other law; 
• allotment of shares to fulfil the requirements of the Act; and 
• payments for maintenance of the company's office and records.

Procedure for Obtaining Dormant Status (Section 455(1) and (2)) 

• A company eligible for dormant status may make an application to the Registrar in the prescribed manner. 
• Upon consideration of such application, the Registrar shall allow the status of a dormant company and issue a certificate in the prescribed form to that effect. 
• Where a company has not filed financial statements or annual returns for two consecutive financial years, the Registrar shall issue a notice to that company and enter its name in the register of dormant companies even without an application from the company.

Register of Dormant Companies (Section 455(3) and (4)) 

• The Registrar is required to maintain a register of dormant companies in the prescribed form. 
• This register serves as an official record of all companies that have obtained or been assigned dormant status, and enables regulatory oversight of such companies.

Obligations of a Dormant Company and Revival (Section 455(5)) 

• A dormant company is not entirely exempt from statutory obligations. It must — 
• maintain such minimum number of directors as may be prescribed; 
• file such documents as may be prescribed; and 
• pay the prescribed annual fee to the Registrar in order to retain its dormant status. 
• A dormant company may become an active company by making an application to the Registrar accompanied by the prescribed documents and fee.

Striking Off from the Register (Section 455(6)) 

• Where a dormant company fails to comply with the requirements of Section 455, the Registrar shall strike off its name from the register of dormant companies. 
• This provision ensures that the dormant company framework is not misused as a permanent escape from statutory compliance, and that only genuinely inactive companies retain the benefit of reduced obligations.

Conclusion 

The dormant company framework under Section 455 of the Companies Act, 2013 strikes a balance between preserving corporate existence and reducing unnecessary compliance burdens for genuinely inactive entities. By establishing clear criteria for eligibility, procedural safeguards for registration, and minimum continuing obligations, the provision ensures that dormant status is a legitimate regulatory accommodation rather than a mechanism for evasion of statutory duties.