Definition and Status Recognition

• A dormant subsidiary is a company that has no significant accounting transactions and is not actively carrying on business.
  
• Under Section 455 of the Companies Act, 2013, such a company can apply for dormant status to reduce compliance burden.
  
• The status must be formally applied for and granted by the Registrar of Companies (ROC).
  
• It must continue to comply with minimal filing and record-keeping obligations.
  
• Holding companies or subsidiaries that are inactive but formed for future projects may also apply for this status.
  

Filing for Dormant Status

• The company must pass a special resolution in a general meeting or obtain all shareholders’ consent.
  
• File Form MSC-1 with the ROC along with the required resolution and declarations.
  
• The ROC may issue a certificate of dormant status if all conditions are met.
  
• The company must have no outstanding loans, or if there are loans, a no objection certificate (NOC) from lenders must be submitted.
  
• The company must not have ongoing inspection, inquiry, or legal proceedings.
  

Annual Compliance Filing (MSC-3)

• Dormant subsidiaries are exempt from regular annual filings like AOC-4 and MGT-7.
  
• Instead, they must file Form MSC-3 annually within 180 days from the end of the financial year.
  
• MSC-3 includes a statement of affairs, confirming the dormant status and listing any minimal financial activities.
  
• It must be digitally signed by a director and certified by a practicing Chartered Accountant or Company Secretary.
  
• Non-filing of MSC-3 may result in loss of dormant status and restoration to active status.
  

Maintenance of Statutory Records

• The dormant company must still maintain basic statutory registers, including those of members and directors.
  
• It must have a registered office address and keep books of accounts at that location.
  
• Directors must file DIR-3 KYC annually to keep their DIN active.
  
• Changes in directors, capital, or address must be filed in respective forms like DIR-12, SH-7, or INC-22.
  
• If any “significant transaction” is conducted, the company must immediately apply to change its status to “active.”
  

Reactivation from Dormant Status

• A dormant subsidiary can apply to become active by filing Form MSC-4 to the ROC.
  
• It must resume filings of AOC-4, MGT-7, and other applicable forms after reactivation.
  
• Any penalties for non-compliance during the dormant period must be cleared.
  
• The ROC may inspect records to ensure that the company qualifies for status change.
  
• A certificate of active status is issued upon approval of MSC-4.