Section 455 Dormant Company — Meaning, Rules & Process

Dormant Company Section Explained: Section 455 of the Companies Act, 2013

Introduction — When a Company Needs a Pause, Not a Full Stop

Not every company is meant to operate from day one.

Some are created to hold intellectual property.
Some are formed for a project that will launch later.
And some businesses simply need time before restarting operations.

Instead of shutting such companies down, the law provides another path — Dormant Company status.

Under Section 455 of the Companies Act, 2013, a company that is temporarily inactive or inoperative can apply to the Registrar of Companies (ROC) and be classified as Dormant. This keeps the company legally alive, protects its name and assets, and reduces compliance costs until operations resume.

This provision is extremely useful for startups, asset-holding entities, real-estate SPVs, R&D companies, and future-project firms.

Let’s break down the concept in simple language — purpose, eligibility, filings, compliances, reactivation, and mistakes to avoid.

What Is a Dormant Company? — Meaning Under Section 455

The Dormant company definition is provided under Section 455. It applies to:

a company formed and registered for a future project, or
a company created to hold an asset or intellectual property, or
a company that has been inactive for the last two financial years, or
one who obtains the status of being dormant voluntarily.

In simple terms, it is:

a company that is temporarily inactive or inoperative, but legally preserved for future use.

A dormant company continues to exist — just with restricted activities and lighter compliance.

Purpose of Section 455 — Why Dormant Status Exists

The objective is practical and business-friendly:

reduce compliance burden when there is no active business
allow companies to retain their name and structure
help businesses hold assets, trademarks, IP, or property
avoid the cost and hassle of closing and reopening a company later

You can read the official rules in Companies (Miscellaneous) Rules, 2014 — Dormant Company Provisions.

A dormant company is an excellent opportunity to start a company for a future project or hold assets without running full operations immediately.

Eligibility — Who Can Apply for Dormant Status?

A company can apply if:

it has no significant accounting transaction during the financial year, and
it has been inactive or operating at a minimal level.

Significant Accounting Transaction (Exclusions)

The law excludes the following from being treated as “significant”:

fees paid to ROC
allotment of shares
payment for office maintenance
statutory payments

This means minor compliance-related payments do not affect eligibility.

However, transactions like sales, services, investments, loans, or trading activities disqualify the company from dormant status.

For detailed compliance definitions, refer to MCA Dormant Company Guidelines.

Inactivity Period & Time Limit

A company can remain dormant for a maximum of 5 consecutive financial years.

If it continues beyond that period without activation, the ROC may strike off the company under Section 248.

How to Apply — The Dormant Company Application Process

To obtain dormant status, the company files an application with ROC in Form MSC-1.

You can download the form here:
👉 MSC-1 — Application for Dormant Status

The company must confirm that:

it has been inactive or is formed for a future project
no inspection, inquiry, or prosecution is pending
there is no outstanding public deposit or loan default
no dispute or major financial obligation exists

Once approved, the ROC records the status as Dormant.

Minimum Compliance Requirements for a Dormant Company

Going dormant doesn’t mean zero compliance — it means minimal compliance.

Key obligations include:

minimum number of directors (as per company category)
maintaining a registered office
filing annual return in Form MSC-3
paying small annual fees
ensuring no significant accounting transactions are carried out

Compared to an active company, compliance workload and cost are drastically lower.

When Dormant Status Is NOT Allowed

A company cannot be classified as dormant if:

there is an ongoing prosecution, inspection, or investigation
any loan remains unpaid
outstanding statutory dues exist
secured creditors do not consent
it is listed, or has public financial exposure

This prevents misuse of the provision.

For verification, refer to MCA Circulars & Clarifications.

Reactivation — Returning From Dormant to Active Status

When business activities are ready to begin again, the company can apply for reactivation through Form MSC-4.

👉 MSC-4 — Application for Active Status

After ROC approval via Form MSC-5, the company regains Active status and resumes full compliance.

Section 455 ensures businesses can pause when necessary — and restart smoothly when ready.

Real-World Examples — When Dormant Status Makes Sense

Example 1 — Startup Holding a Mobile App IP

A founder registers a company to develop an app but delays launch for two years.

Rather than shutting it down:

the company applies for Dormant status
retains its name and IP
keeps compliance minimal until launch

Learn more about Intellectual Property Holding Companies.

Example 2 — Future Real Estate Project

A land-holding SPV is created for a construction project planned after five years.

Dormant status helps the entity exist legally without unnecessary operational filings.

For SPV structuring references:
👉 RERA India Portal

Example 3 — Company Pausing Operations Due to Market Conditions

Business slows temporarily. The promoters don’t want to close the entity.

Dormant classification allows them to:

preserve brand identity
avoid recurring compliance burden
restart later when conditions improve

Common Mistakes Companies Make (And Should Avoid)

Many businesses misunderstand dormant status and run into problems:

carrying out business transactions assuming they “don’t count”
treating dormant status as a substitute for strike-off
ignoring annual MSC-3 filing
taking unsecured loans while dormant
forgetting the 5-year inactivity limit
missing ROC notices or communications

A dormant company is still a legal entity — just with limited activity.

Pro Tips to Manage a Dormant Company Smartly

keep financial transactions strictly limited to compliance-only payments
document board resolutions clearly before applying
maintain director KYC and basic company records
review status annually to avoid violations
reactivate before planning business operations

You can track compliance due dates here:
👉 MCA Compliance Calendar

Action Steps — Should You Choose Dormant or Strike-Off?

Choose Dormant Status if you plan to:

restart operations later
hold assets, licenses, or IP
preserve company name and structure

Choose Voluntary Strike-Off if:

the company will never operate again
there is no future project intent
shutting down permanently makes more financial sense

Strike-off reference:
👉 Form STK-2 — Application for Strike-Off

When in doubt — consult a professional before filing anything with the ROC.

Conclusion — Dormant Status Is a Strategic Pause, Not an Exit

Section 455 of the Companies Act 2013 gives businesses a smart option:

Instead of closing a company that is inactive or formed for a future project, you can temporarily place it in Dormant status — protect its identity, reduce compliance burden, and return when the time is right.

It is especially useful for: