# Dormant Company
A dormant company is essentially a 'sleeping' company that legally exists but doesn't carry on significant business operations. The Companies Act recognises and accommodates such companies, allowing them to maintain their corporate existence without the full compliance burden.
## Who Can Apply for Dormant Status?
A company can apply to the Registrar for dormant status if it is:
1. Formed and registered for a future project — for example, a special purpose vehicle (SPV) being kept ready for a project that will start later, OR
2. Formed to hold an asset or intellectual property — for example, a company holding land or a patent without active business, OR
3. An inactive company — already in existence but currently dormant.
## The Key Test — 'No Significant Accounting Transaction'
The company must have no significant accounting transaction during the period.
### What is NOT a 'significant accounting transaction'?
The following transactions are excluded (i.e., they do NOT disqualify a company from dormant status):
| # | Excluded Transaction |
|---|---|
| (i) | Payment of fees by the company to the Registrar |
| (ii) | Payments made to fulfil requirements of this Act or any other law |
| (iii) | Allotment of shares to fulfil requirements of this Act |
| (iv) | Payments for maintenance of its office and records |
## Application Procedure
- The company makes an application to the Registrar.
- It must be filed in the manner prescribed by the rules.
- On approval, the Registrar grants the status of a dormant company.
## Practical Significance
- A dormant company retains its legal existence — no need to strike it off and reincorporate later.
- It enjoys lower compliance while preserving the corporate shell for future use.
- Ideal for project SPVs, IP-holding companies, or companies between projects.