Dormant Company Registration in India – A Complete Guide
A dormant company, as per the Companies Act, 2013, is a registered business that is not actively conducting any significant financial transactions. Many companies opt for dormant status to preserve their business entity, hold assets, or plan for future operations while minimizing compliance requirements.
What is a Dormant Company?
A dormant company is a business entity that is legally registered but not carrying out substantial financial activities. Companies often seek dormant status for reasons such as:
✅ Planning for a Future Project – The business is set up but operations have not yet commenced.
✅ Holding Assets or Intellectual Property – The company exists primarily to own trademarks, copyrights, or real estate.
✅ No Significant Transactions – The entity has minimal or no financial activity in a given financial year.
✅ Temporary Inactivity – The business is inactive but wishes to retain its legal existence.
A company can maintain dormant status for up to five consecutive years. After this period, it must either apply to become active again or risk being struck off by the Registrar of Companies (ROC).
Dormant Status Under the Companies Act, 2013
What is an Inactive Company?
An inactive company is one that has not engaged in business operations or had any significant accounting transactions in the past two financial years. This also includes companies that have failed to file their financial statements or annual returns during this period.
What Qualifies as a Significant Accounting Transaction?
While dormant companies must not have significant transactions, the following exceptions apply:
✔ Payments made to the Registrar of Companies (ROC) or under the Companies Act.
✔ Transactions related to the allotment of shares.
✔ Payments for office maintenance and statutory compliance.
Why Choose Dormant Status?
✔ Preserve Your Company Name
Once a company is registered, no other business can take the same or a closely similar name. Dormant status ensures your brand identity remains secure.
✔ Reduced Compliance Burden
Dormant companies enjoy relaxed regulatory requirements, significantly lowering the costs and efforts needed for compliance.
✔ Easier Reactivation
If you plan to resume business in the future, reactivating a dormant company is much simpler than incorporating a new one.
✔ Fewer Legal Provisions Apply
Dormant companies are subject to fewer provisions under the Companies Act, simplifying compliance requirements.
✔ No Mandatory Auditor Rotation
Unlike active companies, dormant companies are exempt from mandatory auditor rotation, reducing administrative overhead.
✔ Limited Board Meeting Requirements
Dormant companies need to hold only two board meetings per year, unlike active companies, which require more frequent meetings.
Eligibility for Dormant Status
To qualify for dormant company status, a business must meet these requirements:
Minimum Number of Directors
- Public Company – Minimum 3 Directors
- Private Company – Minimum 2 Directors
- One Person Company (OPC) – Minimum 1 Director
Special Resolution or Shareholder Approval
A special resolution must be passed in a general meeting OR at least three-fourths of shareholders (by value) must consent to obtain dormant status.
Other Conditions
The company must not:
- Be under any inspection, inquiry, or investigation.
- Have pending prosecutions or legal cases.
- Hold outstanding public deposits or default on loans.
- Have outstanding statutory dues to the government.
- Be listed on any stock exchange in India or abroad.
🔹 Exception: If a company has outstanding unsecured loans, it can still apply for dormant status by submitting a No Objection Certificate (NOC) from lenders.
Step-by-Step Process for Obtaining Dormant Status
Step 1: Board Meeting & Shareholder Approval
✔ The Board of Directors must pass a resolution authorizing dormant status.
✔ A notice for an Extraordinary General Meeting (EGM) must be sent to all shareholders.
Step 2: Conduct the EGM & Pass Special Resolution
✔ A special resolution approving the dormant status must be passed during the EGM.
✔ A Statement of Affairs, certified by a Chartered Accountant, must be prepared.
Step 3: File Form MGT-14
✔ The special resolution must be filed with the ROC using Form MGT-14 within 30 days of the EGM.
Step 4: Submit Form MSC-1 for Dormant Status
✔ Within 30 days of passing the special resolution, Form MSC-1 must be submitted to the ROC along with:
- Certified copy of Board Resolution & Special Resolution
- Auditor’s Certificate
- Statement of Affairs verified by a Chartered Accountant
- NOC from lenders (if applicable)
Step 5: ROC Approval & Dormant Status Certification
✔ Upon verification, the ROC issues a Certificate of Dormancy (Form MSC-2).
✔ The company is officially declared dormant.
Annual Compliance for Dormant Companies
Contrary to popular belief, dormant status does not mean zero compliance. A company must still meet certain obligations:
✔ Financial Record Maintenance
Dormant companies must maintain books of accounts and hold at least two board meetings per year.
✔ Annual ROC Filing – Form MSC-3
Every dormant company must file an Annual Return (Form MSC-3) within 30 days after the financial year-end, along with:
✔ A duly audited financial statement.
✔ A Board resolution authorizing the filing.
✔ Tax Filings & Statutory Obligations
✔ Income Tax Returns (ITR) must be filed annually.
✔ TDS and GST returns must be filed if applicable.
Dormant Status vs. Active Company – What’s the Difference?
| Feature | Dormant Company | Active Company |
| Compliance Burden | Low | High |
| Board Meetings Required | 2 per year | 4+ per year |
| Annual Filing | Simplified Form MSC-3 | Detailed Annual Return |
| Audit Requirements | Yes, but relaxed | Full statutory audits |
| Reactivation Process | Simple & fast | Already operational |
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FAQs on Dormant Company Registration in India
1. What is a dormant company?
A dormant company is a registered business that is not actively engaged in significant financial transactions or operations. It may be created for future projects, asset holding, or intellectual property management while maintaining legal status with minimal compliance requirements.
2. What is the difference between a dormant company and an inactive company?
A dormant company is voluntarily declared inactive under Section 455 of the Companies Act, 2013. An inactive company, on the other hand, is one that has not conducted significant financial transactions or filed statutory returns for two consecutive years.
3. Why would a company opt for dormant status?
Companies choose dormant status to:
- Preserve their business name.
- Reduce compliance burdens.
- Hold assets or intellectual property.
- Plan for future business activities.
- Avoid unnecessary financial and legal obligations while inactive.
4. How long can a company remain dormant?
A company can maintain dormant status for up to five consecutive financial years. After this period, it must either apply for active status or risk being struck off by the Registrar of Companies (ROC).
5. What are the key eligibility criteria for obtaining dormant status?
To qualify for dormant status, a company must:
- Have no ongoing business operations or significant transactions.
- Be free from legal inquiries, investigations, or prosecutions.
- Have no outstanding public deposits or defaults in payments.
- Ensure all statutory dues and taxes are cleared.
- Not be listed on any stock exchange.
6. What is the procedure to apply for dormant status?
The process involves:
- Passing a board resolution and obtaining shareholder approval.
- Conducting an Extraordinary General Meeting (EGM).
- Filing Form MGT-14 with the ROC.
- Submitting Form MSC-1 with required documents.
- Receiving a Dormant Status Certificate (Form MSC-2) from the ROC.
7. What are the compliance requirements for a dormant company?
A dormant company must:
- Hold at least two board meetings per year.
- File an annual return in Form MSC-3.
- Maintain financial records and statutory compliance.
- File income tax returns and applicable GST/TDS returns.
8. Can a dormant company conduct any business transactions?
A dormant company cannot engage in significant financial transactions. However, it can make necessary payments such as ROC fees, office maintenance, and share allotments.
9. How can a dormant company become active again?
To reactivate, the company must file Form MSC-4 with the ROC, pay applicable fees, and meet all pending compliance requirements. Upon approval, the ROC will issue a certificate in Form MSC-5, restoring active status.
10. Does a dormant company need to appoint an auditor?
Yes, a dormant company must appoint an auditor and file audited financial statements annually, but it is exempt from mandatory auditor rotation requirements.
11. What happens if a dormant company fails to comply with regulations?
Failure to comply with dormant company regulations may lead to penalties, removal from the ROC register, or compulsory conversion to active status.
12. Can a company with outstanding loans apply for dormant status?
Yes, but only if it obtains a No Objection Certificate (NOC) from its lenders and submits it with the MSC-1 application.
13. Can an LLP apply for dormant status?
No, the concept of dormant status applies only to companies registered under the Companies Act, 2013. It does not apply to LLPs.
14. How does dormant status affect tax liabilities?
Dormant companies must still file income tax returns and comply with applicable tax laws, including TDS and GST filings, if relevant.