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Dormant status of a company

Dormant Company was a concept introduced in Companies act, 2013. Dormant Company does not have a definite clause. It is the type of company which is not active and made for future perspective. In section 455 section it is mentioned.

In section 455 there are types of company which are formed and registered under this Act for a future project or to hold an asset or intellectual property and it has no significant accounting transaction. An application is made to the registrar in such manner as may be prescribed.

An inactive company is a type which has not been carrying on any business or operation or has not made any significant accounting transaction during the last two financial years. Companies have not filed financial statements and annual returns during the last two financial years. The dormant company also means any active company doing regular business and regular accounting transactions but it fails regarding mandatory annual documents.

Here are some points significant accounting transaction defined in order to clear out any ambiguity

  • Fee payment by the company to the Registrar.
  • Payment by other requirement or may fulfil other law.
  • Share allotment to fulfil requirement of the act.
  • Maintenance cost of office and records.

These are the types companies required to have minimum directors which can have two board meeting and file minimum one annual financial document with the Registrar. In some cases the dormant company can have its status as active.

Here are some rules regarding dormant company

MSC 1-Application for seeking-No inspection inquiry, NO prosecution under

Application for obtaining status can only be made after obtaining special resolution approval or issuing a notice to all the shareholders. Public deposit or interest is not there for the company. It has no outstanding loan, secured or unsecured. In case of any unsecured loans then the consent of the lender should be obtained and enclosed along with the form. The dormant company does not have any outstanding tax dues either to central or state government or local authorities. These types companies are not listed company.

Minimum number of Directors (In public company as 3 and Private limited  as 2)

MSC 2-Certificate of Registrar

MSC 3- Return of Dormant Company- This indicates the financial position of the company and which shall be duly audited by a chartered accountant in practice.

MSC 4-Application for active status-Company can revert an active status by making another application along with requisite fee.

MSC 5- Certificate of Application Status


There are some rules which state that dormant company cannot remain as a dormant company for more than 5 consecutive financial years. If it remains so, the company will be removed. A maximum number of years company can be dormant is 5 financial years.

Sometimes, Registrar has a doubt that a dormant company has been indulging in business activities and in fact, it is not dormant then he can take necessary action to revert its status to an active company.

Types of Companies under Ministry of Corporate Affairs

Ministry of Corporate affairs is an Indian ministry that is primarily concerned with Companies Act, 2013, Companies Act, 1956, Limited Liability partnership act 2008 and other  rules and regulations. The responsibility of this Ministry is regulation of Indian enterprises in Industrial and Services sector.

Companies can be registered in India

Private Limited Company-It is the type of company recommended for Business. The cost of registration of the private limited company is cheaper than other forms of a company. Private limited should have a minimum of 2 members and can have maximum 200 members. In this company liabilities are limited and it has some features of a partnership.

People mostly prefer this of the company for fundraising. The degree of operation and ownership can easily separate in this type of company. Business can be exited without any hassle. In this members are limited to only contribute towards a number of shares.      

One Person Company-It is the type of company which can be started by a Single member.OPC is the latest form of company in Companies Act, 2013. One person can become the director as well as the shareholder. Similar to the private limited company as the degree of operation and ownership are on the separate basis. 

OPC gives wings in the hand of Sole proprietor to form the company under with full control. It is done without any interference of the third person. This type is easy for an entrepreneur to directly target the market. Fundraising from banks and the financial institution is easy. People who are Indians and resident in India can form OPC.     

Public Limited Company-This is a publicly held company. A large amount of capital investment can easily be obtained. These types companies are considered to be a more transparent business model as compared to other business structures. Investors get the choice of transferring their ownership in the company without any hassle by just selling the shares.

Section 8 Company-These companies are basically formed to encourage arts science, sports, education, research, social welfare, religion, charity, etc. These kinds businesses do not play any vital role in profit. Company Intends to prohibit the payment of any dividend to its members. These companies are the non-profit making company.

Section 8 company was incorporated mainly for welfare purposes. Previously, it was defined as Section-25 Company. Due to commencement of Companies act, 2013 it was called as Section-8 Company

Nidhi Company- Nidhi Company comes from the Hindi word ‘Nidhi’ means fund. These are the  NonBanking financial corporation. These are also known as mutual benefit funds. Nidhi company is known in the corporate scenario is member benefits company. Companies are formed for the welfare of the members and to increase saving habits.  

Other types of Companies

There are some more types companies which can be registered in India.

  • Companies that have unlimited liability
  • Producer Company
  • Joint Venture Company
How to Protect Your Business

However the type and size of business, it is valued by its owner(s) and as the business grows, the bigger the value gets and hence higher the protection needed. The owner must understand the vulnerability that comes along with the success of a business, such as with success comes competition, risks, legal obligations, reputation sustenance, vigilant, etc. 

An owner must be prepared to face the difficulties that come in building a successful business. There are no strict rules to be followed, however, certain aspects of protecting ones business remain constant in all cases. 

Protection against legal threats 

  • Physical assets are one of the most important assets of a business as they are worth a lot of money. For example, they not only include the office space but also the things that fill up the office. All physical assets belonging to the business must be insured to avoid any loss in case of any natural disaster or theft.
  • A legal attorney who is well versed with local laws and policies must be hired to handle any legal actions that may arise at any time of the business operation. A legal attorney will also help in foreseeing any potential legal threat and help in implementing the task at hand accordingly.
  • In case of sole proprietorships, it is important that the owner separate its personal assets from that of the business. Any attack on the business finances will directly impact the personal finances in case the separation is not clearly defined and limited. 

Organize your Finances 

  • Finances of a business must be documented and organized time to time to avoid any threats not only from the outside but also from the conflicts that may rise among the stakeholders of the business.
  • Hiring an accountant is a good start to protecting finances.
  • Finances in sole proprietorships must be specially monitored as the finances of the business may be linked with the personal finances. It is preferred and suggested to keep both the finances separate to avoid loss on the other when one is under attack. 

Protection against technological threats 

  • Technology has reached such heights that it is difficult to run a business without a strong technological support. This may include software that is needed in every domain of running a business. For example, a good software system is needed not only for business documentations but also strong software is needed to run a security check in the office space. Considering the high level cyber attacks and crimes in todays’ times,protection of such technology is needed to protect the business.
  • Protection of intellectual property is highly critical to avoid risking any legal action and theft from any seekers. Trademarks and copyrights are also a major part of technological assets and if these are not protected, they can land a business in a lawsuit against their favor. There are experts available to help protect a business trademark, copyrights, and intellectual property.
  • An IT expert must be hired to ensure any technology used and applied in a business is highly protected from hackers and cyber criminals. 

Protection against reputation threats 

  • Running a business successfully requires that it makes its presence felt in the market at almost all times. Offline marketing that includes display of brand on its products or service material and online marketing that includes its presence on social media platforms are one of the most common and beneficial marketing techniques. Hence, the representation of the business on such platforms must be protected. Simply by using the right language favoring in the progress of business is protecting the business.
  • A social media manager or public/business relations’ manager understands the operations of such platforms to help maintain the reputation of the business. Hiring of such an expert will help the business from being attacked by any reputational threats that are sometimes the most probable causes of the downfall of a business. 

Protecting a business can be a task but the efforts will make the success of a business only smoother. If the above major aspects are taken care of, the business is well protected and any hassle on its way of progress can be dealt with ease.


Every entrepreneur will agree that the procedure of incorporating a Company can be tedious and cumbersome despite the necessity of the steps involved. Even though, a Company can now be incorporated online as well as offline, the steps remain the same. 

The government of India has taken a significant step in easing the procedure of incorporation of a Company. On the occasion of Gandhi Jayanti, the government launched SPICe that is simplified proforma for incorporating Company electronically. 

Ministry of Corporate Affairs has simplified the procedure by introducing filing of pre-dated Memorandum or Articles of Association electronically. It will further simplify the earlier procedure of incorporating a Company using form Inc-29. As per the latest update, earlier forms may be replaced with newer SPICe form Inc-32. 

There are certain features of SPICe that are as follows. 

  • Simplified and completely digital form of Company incorporation
  • Standard format of Memorandum and Articles of Association
  • Memorandum and Articles will now be filed as linked e-forms
    • For Memorandum of Association, an applicant must only copy paste the necessities
    • For Articles of Association, an applicant may choose the clauses that are applied and choose that are not applied or need alteration
  • Provision to apply for Company incorporation with a preapproved Company name
  • Digital Signature Certificates of subscribers and witnesses will now be affixed
  • Detailed and informative Inc-32 as compared to older form Inc-29
    • Older form, Inc-29 fulfills all purposes of Company registration that is application for DIN allotment, reservation of Company name, incorporation and even PAN and TAN
    • New form, Inc-32 provides the same facility, further including the filing of Memorandum and Articles of Association electronically 

This initiative is a bold step and will increase gains with faster review of Memorandum and Articles of Association making SPICe the sole procedure to incorporate a Company in India.

Looking for company registration? Connect with us at This email address is being protected from spambots. You need JavaScript enabled to view it. or Call us at +91-8882580580


E voting system in the companies

To infuse the more participation of shareholders in the decision making process, e-voting system has also been annexed to the companies’ shareholder meeting.

What we have been observing till commencing the new companies act, 2013 is that shareholders hardly used to come at the General Meeting of the company due to remoteness of the place of the meeting. In this way, shareholders who had majority stake in the companies usually have a say in the decision making process and interest of the minority shareholders had been set aside. Therefore, this e-voting system has been introduced in corporate decision making process.

Let’s first understand the applicability of this e-voting:

E-voting system is not applicable on all the companies. This is a little cumbersome process and expensive as well for small companies. Therefore, only following class of companies are required to follow e-voting system:

  • Companies whose shares are listed on the stock exchange.
  • Companies having 1000 or more shareholders.

This e-voting facility must be communicated by the companies in the notice of annual general meeting (AGM) itself. Notice of AGM shall be sent before 21 days of the meeting, so you have arrange this e voting facility before sending the notice because this notice contains the details about the e-voting and how to use this facility.

What matters shall be included in the Notice of AGM about e-voting

The notice of the meeting shall state that:

  1. Company is providing the e-voting facility for voting and the items/transaction conducted through e-voting.
  2. Process and manner to vote through electronically.
  3. There must some time period mentioned in the notice to consider the vote cast through e-voting.
  4. Provide the details of login Id.
  5. Process and manner for creating/generating the password to cast the vote.
  6. Notice shall also be displayed on the website of the company, if any.

Public Notice by way of an advertisement

  1. A public notice is also required to be published in two newspapers; one in English newspaper and another is in the local language of the states where the registered office of the company is situated.
  2. A public notice is also placed on the website of the company and agency

Content of the advertisement must state:

  1. Business which may be transacted through e-voting.
  2. The date and timing of commencing and ending of e-voting.

Key takeaways

  1. The members who have already cast their votes through e-voting can also attend the meeting in person.
  2. The facility for remote e-voting shall remain open for at least three days and shall close at 5.00 p.m. on the previous day of the general meeting.
  3. Once the vote is cast on the resolution, then it can not be changed subsequently.

After observing the law behind the e-voting, one this is clear that now voting system in the company more align to democratic manner and convenient for shareholders to vote remotely.

Is Independent Director really an Independent person?

Nowadays, in the age of start-ups directors are the heroes of the business entity. They are the real players who manage or control the whole of the undertaking efficiently.

Directors are the representatives of the investors and ensures that the company is moving on the right path to achieve its objectives. Before taking any decision they always keep in mind the interest of consumers, employees and investors. For every start-up, board of directors brings supervision to avoid mismanagement.

There are various types of directors which include resident director, executive director, non executive director, independent director, woman director etc. According to Companies Act, 2013 the concept of independent director is very simple. To know more about independent director we need to go through the whole concept.

Independent Director

Independent director are also known as outside director. They are the members of the company’s board of director who was bought in from outside the company. Moreover they are also responsible to improve the performance of the company.

An independent director is a director or member of a board of directors who does not have a material or pecuniary relationship with company or related persons, except sitting fees. In other words, no director qualifies to be an independent unless the Board of Directors determines that he has 'no material relationship' with the listed company, either directly or as a partner, shareholder or officer of an organization that has a relationship with the company.

Appointment of Independent Director

The process of appointment of independent director is very easy. Such appointment is approved at the meeting of the shareholders. According to Companies Act, 2013 appointment of independent director has mandated for all listed public companies.

Appointment of independent director in case of all listed public companies and unlisted public companies are as follows--

In case of listed public companies- at least one-third of the total Directors to be independent.

In case of unlisted public companies- following class of companies shall have at least two directors as independent director-

  • Public Companies having paid up share capital of Ten Crore rupees or more.
  • Public Companies having turnover of One Hundred Crore rupees or more; or.
  • Public Companies which have, in aggregate, outstanding loans, debentures and deposits exceeding 50 Crore rupees or more.

Term of Appointment

The appointment is for a term of 5 (five) years commencing  from the date of appointment and ending (‘Termination Date’) on 6th Annual General Meeting of the Company following the date of appointment. Such appointment may be terminated at any time by the Company in accordance with Companies Act, 2013.          To appoint eligible and willing independent director, central government and organisations will maintain a data bank of persons. Further, independent directors can be removed if they fail to attend any board meeting for 12 months period with or without permission from the board.

The time period of the independent director must not exceed two consecutive periods of 5 years each and can be extended for a second term only after passing a special resolution.

Re appointment of independent director

According to Companies Act, 2013 independent director can be re appointed after the expiry of second term but such re appointment can be done only after the expiry of three years.

So, these above are some of the provisions of independent director. These concepts were introduced mainly to ensure transparency in corporate governance and safeguard the autonomy of independent directors.

 Independent director always ensure that the management and affairs of the company are conducted in a best way so that organisational objectives can be achieved easily.

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