What Is a Dormant Company? Section 455 Explained

A dormant company is a company that the Registrar has formally recorded as not trading. Section 455 of the Companies Act, 2013 creates the status, defines the two tests that qualify a company for it, sets up a separate register of dormant companies, and provides for the status to be entered by the Registrar even where the company never asked for it. It is a distinct thing from a company that has simply gone quiet.

The two routes into dormant company status

Section 455(1) offers the status to two different kinds of company, and they are separately defined.

The purpose built one. A company formed and registered under the Act for a future project or to hold an asset or intellectual property, and which has no significant accounting transaction. This is a company that was never meant to trade yet.

The inactive one. An "inactive company", which the Explanation to the section defines as 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. The three limbs are alternatives, so any one of them makes a company inactive.

Either may make an application to the Registrar, in such manner as may be prescribed, for obtaining the status of a dormant company. Under section 455(2), the Registrar on consideration of the application shall allow the status and issue a certificate in the prescribed form.

What a significant accounting transaction is not

The definition is drafted as an exclusion list, which makes it precise. Under Explanation (ii) to section 455(1), a significant accounting transaction means any transaction other than:

1. Payment of fees by a company to the Registrar
2. Payments made by it to fulfil the requirements of the Act or any other law
3. Allotment of shares to fulfil the requirements of the Act
4. Payments for maintenance of its office and records

Everything else is significant. There is no de minimis amount in the section, so the test is the nature of the transaction rather than its size. A single payment outside those four categories takes a company out of the no-significant-accounting-transaction limb.

The register the Registrar has to keep

Section 455(3) requires the Registrar to maintain a register of dormant companies in such form as may be prescribed. This is what turns dormancy from a description into a record, and it is why the status is checkable rather than inferred.

Section 455(4) is the involuntary route in. Where a company has not filed financial statements or annual returns for two financial years consecutively, the Registrar shall issue a notice to that company and enter the name of such company in the register maintained for dormant companies. Note the verb: shall, not may. The two-year non-filing trigger here uses the same period as the inactive-company limb in the Explanation, but this sub-section acts on it without any application from the company.

Staying dormant, and coming back

Section 455(5) sets out the maintenance obligations. A dormant company shall have such minimum number of directors, file such documents and pay such annual fee as may be prescribed to the Registrar to retain its dormant status in the register. The same sub-section provides the way back: it may become an active company on an application made in that behalf, accompanied by such documents and fee as may be prescribed.

Section 455(6) is the sanction. The Registrar shall strike off the name of a dormant company from the register of dormant companies where it has failed to comply with the requirements of the section. Read carefully, that removes the company from the dormant register, which is a different act from striking the company off the register of companies under section 248.

How dormancy interacts with strike off

The two regimes are cross wired at one point, and it runs in the company's favour.

Section 248(1)(c) lets the Registrar move to strike a company off where it is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455. Applying for dormant status within that window is therefore the answer to that particular ground. The clause is lettered (c) because the original clause (b) was omitted by Act 21 of 2015 with effect from 29 May 2015.

There is a second cross reference outside Chapter XXIX. Explanation II to section 165(1), inserted by Act 1 of 2018 with effect from 9 February 2018, provides that for reckoning the twenty company limit on directorships, directorship in a dormant company shall not be included.

Where this sits in the disclosure picture

Dormant status is a Registrar of Companies record under the Ministry of Corporate Affairs, not an exchange filing. For an investor reading a group structure, it is a useful label: a dormant subsidiary is one the Registrar has accepted is holding an asset or a future project rather than trading, and a company entered under section 455(4) is one that stopped filing.

• What is strike off of a company covers section 248, including the ground that a dormant-status application answers.
• How to restore a struck off company covers the route back for a company that did get struck off.
• What is a form MGT-7 is the annual return whose non-filing for two consecutive years triggers section 455(4).
• What is a form AOC-4 is the financial statement filing on the other half of that trigger.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.