June 7, 2019

Annual Return of Dormant Company | Form MSC 3

We usually came across many such companies which are not having any operations since incorporation or which ceased to have operation from certain period of time. Companies Act, 2013 (“The Act”) provides provision of Dormant company to deal with such kind of companies.

Companies Act, 2013 prescribes simplified return format and other simplified compliance for such company subject to certain restrictions. Provisions of Dormant Company are given under section 455 of the act.

1. Meaning of Dormant Company (Section 455(1) of the act)

Any of the following company may obtain status of dormant company by making an application to the Registrar of Company (“RoC”):

A Company formed and registered for a future period or to hold an asset or intellectual property and such company has no significant accounting transaction** or
An Inactive company*

* As per explanation to Section 455(1) of the act, Inactive company means a company which is not carrying on any business or operation, or has not made any significant accounting transaction** during the last 2 financial years, or has not filed financial statements and annual returns with RoC during the last 2 financial years.

** “Significant Accounting Transaction” is defined in explanation to Section 455(1) of the act which means any transaction other than:

payment of fees by a company to RoC
Any payment made by company to fulfill the requirement of the act or any other law
allotment of shares to fulfil the requirements of the Act; and
payments for maintenance of its office and records.

Company shall make application in form MSC-1 to obtain the status of dormant company and RoC shall issue the certificate in form MSC-2 to the company for allowing the status of dormant company.

2. Pre-requisite for obtaining status of Dormant company (section 455(1) of the act read with Rule 3 of Companies (Miscellaneous) Rules, 2014

For the purpose of obtaining status of Dormant company, a company may make an application in form MSC-1 to RoC after passing a special resolution to this effect in the general meeting of the company or after issuing a notice to all the shareholders of the company for this purpose and obtaining consent of at least 3/4th shareholders (in value).

However, a company shall be eligible to obtain status of dormant company only if –

no inspection, inquiry or investigation has been ordered or taken up or carried out against the company;
no prosecution has been initiated and pending against the company under any law;
Neither the company is having any public deposits which are outstanding for payment nor the company has defaulted in payment of such deposit or interest thereon;
the company is not having any outstanding loan, whether secured or unsecured. However, even if company has any oustanding unsecured loans, company may still apply after obtaining concurrence of the lender and enclosing the same with Form MSC-1 ;
there is no dispute in the management or ownership of the company and a certificate in this regard is enclosed with Form MSC-1;
company does not have any outstanding statutory taxes or dues payable to the Central Government or any State Government or local authorities etc.;
the company has not defaulted in the payment of workmen’s dues;
the securities of the company are not listed on any stock exchange within or outside India.

3. Suo-moto granting of status of “Dormant Company” by RoC (Section 455(4) of the act)

In case a company has not filed its financial statement or annual return for 2 financial years consecutively then RoC shall issue a notice to the company and enter the name of company in register of Dormant Company.

4. Annual Return by Dormant Company (Section 455(5) of the act read with Rule 7 of Companies (Miscellaneous) Rules, 2014 )

Dormant company shall file an annual return indicating financial position of the company, duly audited by practicing chartered accountant in form MSC-3.

MSC-3 is required to be filed within 30 days from the end of each financial year.

5. Information to be furnished in form MSC-3

Dormant company is required to furnish following information in form MSC-3:

Corporate Identification Number (“CIN”)
Name and address of company will auto-populate based on CIN
Date of issuance of certificate to Dormant Company
Brief particulars of the principal business activity of the company
Financial year end date to which annual return relates
Number of directors. (Minimum one in case of OPC, two in case of private company and 3 in case of public company)
Particulars of Board meeting held
- Date of Board Meeting
- Total number of directors as on the date of meeting
- Total number of directors present in meeting
Change in Management of company
- Date of change
- Name of key persons in the new management
- particular(s) of change
Statement of transactions other than significant accounting transactions.
Particulars of allotment of shares
- Date of allotment of shares (If more than one allotment has been made during the year then latest date in current year should be entered)
- Purpose of allotment
- Number of shares allotted
- Face value per share
- paid up value of such share
- consideration received (Cash/other than case)
Particulars of the annual fee (amount to be paid alongwith this form)
Whether any significant transaction is carried out during the year
Shareholding pattern of the company

6. Documents to be attached to form MSC-3

Following documents are mandatory required to attach to form MSC-3:

Copy of board resolution showing authorisation given for filing MSC-3
Audited statement of Financial position of company

7. Legal Fee applicable on filing of MSC-3

Filing fee for MSC-3 will be based on nominal share capital of the company, which is as follows:

Nominal Share Cpaital	Fee Applicable
Less than 1,00,000	INR 200
1,00,000 to 4,99,999	INR 300
5,00,000 to 24,99,999	INR 400
25,00,000 to 99,99,999	INR 500
1,00,00,000 or more	INR 600

However, in case of company not having any share capital, fee of INR 200 will be applicable.

8. Additional Fee applicable in case of delay in filing of MSC-3

If company fails to files MSC-3 within prescribed time limit then additional fee shall be applicable based on delay in number of days:

Period of Delay	Fee Applicable
Upto 30 days	2 times of normal fees
More than 30 days and upto 60 days	4 times of normal fees
More than 60 days and upto 90 days	6 times of normal fees
More than 90 days and upto 180 days	10 times of normal fees
More than 180 days	12 times of normal fees

9. Consequences of non filing of annual return (Section 455(6) of the act)

The registrar shall strike off the name of the dormant company from its register if dormant company fails to comply with provisions of Section 455 of the act.

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DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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