Company Law and Practice · Dormant Company

Meaning and Concept of Dormant Company under Section 455

Updated 11 October 2026 · Fact-checked

A dormant company is a company that has obtained dormant status from the Registrar under Section 455. It is either formed for a future project or to hold an asset or intellectual property and has no significant accounting transaction, or it is an inactive company. It must apply to the Registrar.

Understand Meaning and Concept of Dormant Company

Some companies are set up but do not trade. A promoter may register a company to hold land, a trademark or a patent, or to be used for a project that will start later. Such a company has no real business. Keeping it fully active means filing and compliance costs for no gain. The Act therefore allows a special status called dormant company.

Section 455(1) gives two routes. Route one: the company was formed and registered under the Act for a future project, or to hold an asset or intellectual property, and has no significant accounting transaction. Route two: the company is an inactive company. In both cases the company may make an application to the Registrar in the prescribed manner to obtain dormant status.

The Explanation defines an inactive company. It is a company that 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. Note the word "or". Any one of these three limbs is enough.

A significant accounting transaction is any transaction other than four listed ones: (a) payment of fees by the company to the Registrar; (b) payments made to fulfil the requirements of the Act or any other law; (c) allotment of shares to fulfil the requirements of the Act; and (d) payments for maintenance of its office and records. So routine statutory and upkeep payments do not stop a company from being dormant. Any other transaction, such as buying stock or paying a vendor for trading, is significant.

Dormant status is not automatic on application. Under Section 455(2), the Registrar considers the application, allows the status and issues a certificate. Section 455(4) also covers a company that has not filed financial statements or annual returns for two financial years consecutively. There the Registrar issues a notice and enters its name in the register of dormant companies. This page covers the meaning. Procedure and compliance are separate topics.

Key rules to remember

Dormant company (Section 455(1)): Company formed for a future project / to hold an asset or IP + no significant accounting transaction, OR an inactive company → may apply to the Registrar for dormant status; It is a right to apply. The status is granted by the Registrar, who issues a certificate under Section 455(2).
Inactive company (Explanation (i)): No business or operation, OR no significant accounting transaction in the last 2 financial years, OR no financial statements and annual returns filed in the last 2 financial years; Any one limb is enough. The test looks at the last two financial years.
Significant accounting transaction (Explanation (ii)): Any transaction other than: (a) fees to Registrar; (b) payments to meet requirements of the Act or other law; (c) allotment of shares to meet requirements of the Act; (d) payments for maintenance of office and records; The four exclusions are the only ones. Learn them as a list.
Register of dormant companies (Section 455(3) and (4)): Registrar maintains the register; for 2 consecutive years of non-filing of financial statements or annual returns, Registrar issues notice and enters the name in the register; This is a second route into dormant status, initiated by the Registrar.

How to solve Meaning and Concept of Dormant Company questions

Use this method for any question that asks you to define a dormant company, or to decide whether a given company can be treated as dormant.

1State the provision: Section 455(1) of the Companies Act, 2013 lets a company apply to the Registrar for dormant status.
2Identify which route applies: formed for a future project or to hold an asset or intellectual property with no significant accounting transaction, or an inactive company.
3If the facts mention inactivity, apply the three limbs of an inactive company over the last two financial years and note that any one is enough.
4Test every transaction in the facts against the four exclusions. Anything outside them is a significant accounting transaction.
5Remember that the Registrar must allow the status and issue a certificate under Section 455(2). Applying does not make the company dormant.
6Write a clear conclusion: the company is or is not eligible to apply, with a one-line reason.

Quickest way: Two-question check for eligibility

When to use it: Use it for short-answer or case-based questions when time is tight.

Ask 1: Was it formed for a future project or to hold an asset or IP, with no significant accounting transaction? If yes, eligible.
Ask 2: Is it inactive: no business, or no significant transaction, or no filings in the last two financial years? If yes, eligible.
Check each payment against the four exclusions: Registrar fees, legal payments, required share allotment, office and records upkeep.
Conclude with the section number and say the Registrar grants the status by certificate.

Common mistakes in Meaning and Concept of Dormant Company

Saying a company becomes dormant automatically once it stops trading.
The word "dormant" sounds like a natural state.
Fix: State that the company must apply and the Registrar allows the status and issues a certificate under Section 455(2). The only exception is the Registrar-initiated entry under Section 455(4).
Treating every payment as a significant accounting transaction.
Students forget the four exclusions.
Fix: Learn the list: Registrar fees, payments to meet legal requirements, allotment of shares to meet the Act, and office and records maintenance. These are not significant.
Requiring all three limbs of an inactive company together.
The definition is long and students assume it is cumulative.
Fix: The limbs are joined by "or". Any one is enough.
Mixing up the period. Writing one year or three years for inactivity.
Confusion with other compliance periods in the Act.
Fix: The Explanation says the last two financial years. Section 455(4) also uses two consecutive financial years.
Forgetting the first route and defining a dormant company only as an inactive company.
Notes often stress inactivity alone.
Fix: Always mention the company formed for a future project or to hold an asset or intellectual property with no significant accounting transaction.

Worked examples

Example 1

Nirmaan Holdings Private Limited was incorporated to hold a trademark that its promoters plan to commercialise later. Its only transactions are payment of Registrar fees, filing fees for annual filings and rent for its registered office. Can it apply for dormant status? Explain.

Show the solution

Provision: Section 455(1) allows a company formed for a future project or to hold an asset or intellectual property, with no significant accounting transaction, to apply to the Registrar for dormant status.
Facts: the company was formed to hold a trademark, which is intellectual property. This fits the first route.
Transactions: Registrar fees and filing fees are payments of fees to the Registrar or payments to meet legal requirements. Office rent is a payment for maintenance of its office. All fall within the exclusions in the Explanation.
So none of its transactions is a significant accounting transaction.

Answer: Yes. Nirmaan Holdings qualifies under Section 455(1) and may apply to the Registrar. It becomes dormant only when the Registrar allows the status and issues a certificate under Section 455(2).

Example 2

Kaveri Traders Limited carried on no business in the last two financial years and made no significant accounting transaction, but it filed its financial statements and annual returns on time. Is it an inactive company under Section 455?

Show the solution

Provision: under the Explanation to Section 455, an inactive company is one that 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 limbs are alternatives, joined by "or". Satisfying any one is enough.
Facts: Kaveri carried on no business and made no significant accounting transaction in the last two financial years. The first limb is met, and so is the second.
The fact that it filed its returns on time means the third limb is not met, but that does not matter.

Answer: Yes. Kaveri Traders Limited is an inactive company because at least one limb is satisfied. It may apply to the Registrar for dormant status under Section 455(1).

Exam tips

Write the definition in two parts: the future project or asset or IP route, and the inactive company route. Examiners look for both.
Reproduce the four exclusions from significant accounting transaction in a short list. This often earns marks on its own.
In case questions, test each transaction one by one and then conclude. Do not just state the result.
Cite Section 455(1) for meaning, 455(2) for the Registrar's certificate, and Section 455(4) for notice after two years of non-filing.
Keep procedure and compliance for their own answers. Do not overload a definition question.

Practice questions from Dormant Company

Meaning and Concept of Dormant Company: frequently asked questions

What is a dormant company under Section 455?

It is a company that has obtained dormant status from the Registrar. It is either formed for a future project or to hold an asset or intellectual property with no significant accounting transaction, or it is an inactive company.

What is a significant accounting transaction?

It is any transaction other than payment of fees to the Registrar, payments made to meet requirements of the Act or other law, allotment of shares to meet the Act's requirements, and payments for maintenance of office and records.

Who is an inactive company?

A company that has not carried on any business or operation, or has not made any significant accounting transaction, or has not filed financial statements and annual returns, during the last two financial years. Any one condition is enough.

Is a company dormant just because it files an application?

No. The Registrar considers the application, allows the status and issues a certificate under Section 455(2). Until then the company remains active.

Can the Registrar make a company dormant without an application?

Yes, in one case. Under Section 455(4), if a company has not filed financial statements or annual returns for two financial years consecutively, the Registrar issues a notice and enters its name in the register of dormant companies.