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CS Executive · Company Law and Practice · Dormant Company

Kaveri Traders Ltd has carried on no business and made no significant accounting transaction during the last two financial years, though it did file its financial statements. Under section 455, how is it classified?

It is an inactive company that may apply for dormant status. Section 455 defines inactive as having no business, or no significant accounting transaction in the last two financial years, or no filing of financial statements and returns. These are alternatives, so any one is enough.

  1. AAn inactive company, which may apply for dormant statusCorrect
  2. BA dormant company by operation of law
  3. CA company liable to be struck off immediately
  4. DAn active company because it filed financial statements

Explanation

An inactive company is one that has not carried on 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 for two years. The conditions are alternatives, so Kaveri qualifies and may apply. Filing statements does not remove inactive status.

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