A Company is not carrying on any business for last two years, the Management of the Company decided to make an application for obtaining the status of Dormant Company. One of the Director stated that since, the Company i

CS Executive · Setting up of Business Entities and Closure · PYQS · June 2021
A Company is not carrying on any business for last two years, the Management of the Company decided to make an application for obtaining the status of Dormant Company. One of the Director stated that since, the Company is having unsecured loans from Shareholders and relatives of Directors, the Company cannot obtain the Dormant status. Citing relevant provisions of the Companies Act, 2013 and Rules made thereunder, explain whether the statement of the Director of the Company is correct? Will your answer differ, if the Company have also obtained Loans from Shareholders and relatives of Directors in the form of secured Debentures?

Answer & Explanation:

According to section 455 of the Companies Act, 2013 and rules made thereunder, the Registrar shall not grant the status of a dormant company, if there is any outstanding loan, whether secured or unsecured. In case the company has any outstanding unsecured loan, the company must apply for the status of a dormant company after obtaining the concurrence or approval of the lender which is required to be enclosed with Form MSC-1. Therefore, considering the provisions of the Companies Act, 2013 and rules made thereunder, the statement of the director of the company w.r.t. unsecured loans is not correct. If the Company has obtained Secured Loans the Registrar shall not grant the status of a dormant Company.

Topics: Company Law

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