In this article, we shall discuss the procedure for converting a company with a dormant status into an active company.

By nature and by definition a company is considered to be a ‘Person in perpetuity’. This means that when a company is formed, it is formed with the expectation that it will last perpetually and way beyond the lifetimes of the people who started it. Any entity formed with an expiry date in mind cannot be considered to be a Status of Active company. 

However, there is also a flip side to it. There are no provisions that require a person starting a company to have ample resources to ensure its perpetuity. A person can form a company with any idea and plan in mind as long as he fulfills the basic criteria, pays the registration fees, and completes annual compliance requirements. So when a company is started but is unable to take off in terms of operations and remains dormant, there has to be a mechanism in place to identify such companies and reassess the status of their perpetuity.

If a company is formed, keeping in mind that it will have to undertake future projects, and if such a company has no transaction history, then it is referred to as a dormant company. All types of organizations, ranging from OPCs to private limited Companies may apply for dormancy status depending on their financial history and future prospects. Section 455 of the Companies Act, 2013 contains guidelines regarding Dormant companies and their working.

Such companies do not need to submit various compliance forms, and hence, individual firms take this step if they anticipate that the coming years might not see a lot of business as this helps them cut further costs. But once they regain momentum, they will want to shift back into being an Active Company. But, how do they go about doing that and reversing their status? If you are looking for these answers, then you are in the right place. Here’s a look at everything you need to know about attaining Active status.

Registrar’s Jurisdiction

While to attain dormant status, companies have to file their application in the MSC-1 format, after issuing a notice to all shareholders, doing the reverse also requires the filing of several forms.

1. As per sub-section (5) of section 455 of the Companies Act, it will obtain the status of the active company if they duly fill out Form MSC-4.
2. Such firms also have to pay a registration fee along with their application and also need to submit returns of Form MSC-3.  Form MSC-3  must be submitted concerning the financial year in which they are applying for active status.
3. If the Registrar is satisfied with the forms and details submitted, he or she will then go ahead and issue Form MSC-5, which will act as a certificate to prove the active status of the company.
4. The Registrar also has the power to strike off a company from government records if it stays dormant for more than five years.
5. If the company applying for Active status, forgets or omits any details or rules as mentioned in Form MSC-1, the Registrar can nullify the application and make the company retain its dormant status.
6. Similarly, if the Registrar believes that a Dormant company has been performing and undertaking financial transactions, he or she has the power to initiate an inquiry as per Section 206 of the Companies Act 2013.
7. If found guilty after the trial, such companies will be removed from the Dormant register and will be considered as Active companies from then on.

Filling Out the Form

For a dormant Registration of company online to regain its active status, it must file Form MSC-4 through an online portal and submit it to the Registrar.

1. To fill the CIN of the dormant company, search for it using its existing registration number on the ‘Find CIN’ service available on the MCA website.
2. The Pre-fill button automatically fills in details such as the name, address, and contact details of the dormant company. In case there is an error or the information requires any kind of updation, opt to do so by entering the correct data in the appropriate fields.
3. Make sure you have saved the approved SRN of the eForm MSC-1 you submitted while filing for dormant status and also the SRN of Form MSC-3 filed when you filed your annual returns for the company.
4. Also, keep ready the date on which the Dormant Status certificate was issued as this will also be an important part of the MSC-4 form.
5. For filing the declaration, enter the right serial number, the date on which the board was resolved, and include the signature of someone who has been trusted with filing the application by the company’s Board of Directors.
6. To be considered valid, the application must be digitally signed by any of the following people:

• Director
• Manager
• Company Secretary
• CEO
• CFO
• CTO

If the person signing the document is the Director of the company, then include the approved DIN. 

If the person signing the document is the Manager, CEO, or CFO, then enter either the DIN number or the PAN of the registered company.

If the person signing the document is the Company Secretary, then he or she must include a verified membership number.

1. A certified and verified copy of the Board resolution which talks about the filing of this form and the attainment of active status must be enclosed with the application as an external attachment

Things to Keep In Mind

Here are some basic things to keep in mind while applying for active status.

• All attachments must be in PDF format.
• Utilize the Check Form button to see if all the mandatory fields have been filled and also to check for random errors within the document.
• The System highlights the errors found and allows you to make the necessary changes.
• Make full use of this functionality as this does not even require an Internet connection.
• After doing this, click on the Pre scrutiny Button to find further errors. Correct if any errors are found.
• Make sure your internet is working before you do this as the Prescrutiny button requires an Internet connection.
• Once you have submitted the application, you will receive an SRN which can be used for future correspondence.

Conclusion

The new companies act has been heavily streamlined, eliminating a lot of unnecessary red tape and time-consuming regulations that are now redundant. At the same time, it has also added a number of other provisions such as this in order to bring clarity and transparency into the landscape of corporate governance which in turn ensures that investments of shareholders are protected and at the same time management of companies have greater flexibility in their manner of operation which only provides further space for innovation and adaptability. If you have any further queries with regards to corporate law and its regulations or require some form of professional assistance in managing your compliances, get in touch with us and our team of experts will ensure that you receive the right kind of assistance.