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CS Executive · Company Law and Practice · Legal Status and Types of Registered Companies

Kaveri Traders Ltd has carried on no business and made no significant accounting transaction in the last two financial years. During this period it paid only the fees due to the Registrar and the rent and upkeep of its registered office. Which statement is correct under the definition in the Companies Act, 2013?

Kaveri Traders is an inactive company. Fees paid to the Registrar and payments for maintaining the office and records are excluded from significant accounting transactions, so the company has made none in two financial years, which satisfies one of the alternative tests for being inactive.

  1. AIt cannot be inactive because it paid fees to the Registrar
  2. BIt cannot be inactive because it paid office maintenance costs
  3. CIt is an inactive company, as those payments are not significant accounting transactionsCorrect
  4. DIt is inactive only if it also failed to file annual returns

Explanation

Under the Explanation to section 455, payments of fees to the Registrar and payments for maintenance of office and records are excluded from significant accounting transactions. So the company has made no significant transaction for two years and fits the definition of an inactive company. The option requiring non-filing is wrong because the three conditions in the definition are alternatives.

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