What Is a Dormant Company? How to Make a Company Dormant, and What Are the Benefits?
What Is a Dormant Company?
In simple terms, a dormant company is a company that has not engaged in any accounting transactions during a financial year and has no outstanding debts. In such a situation, a company can apply to become dormant with the consent of all members, thus retaining the company at minimal costs.
It's essential to note that when a company becomes dormant, it cannot engage in any accounting transactions during that period. If transactions are necessary, notification to reactivate the company is required.
What Is the Process for Applying for Dormant Company Status?
Under Section 5 of the Companies Ordinance, a private company can declare itself dormant by way of a Special Resolution and submit this resolution for registration with the Registrar of Companies.
The company will be considered dormant from either:
1.The date the Special Resolution is submitted to the Registrar of Companies.
Or
2.A later date as specified in the Special Resolution.
What Are the Benefits of Applying for Dormant Company Status?
Becoming a dormant company offers the following benefits:
1.Exemption from annual filing requirements, including holding annual general meetings and preparing financial statements.
2.Cost savings on accounting and audit expenses.
3.Simplified administrative obligations, reducing both time and financial costs.
Do Dormant Companies Need to Pay Business Registration Fees?
Yes, dormant companies are still required to pay their business registration fees on time.
How Can a Dormant Company Be Reactivated?
If a company wishes to reactivate and begin accounting transactions again, it can do so by passing a Special Resolution to declare its intention to carry out accounting transactions. Once this resolution is registered with the Registrar of Companies, the company is no longer considered dormant.The date when a dormant company is no longer considered dormant is either:
The date the Special Resolution is submitted to the Registrar of Companies.
Or
The date when accounting transactions occur.
What Are "Accounting Transactions"?
Accounting transactions refer to transactions that must be recorded in a company's accounting records. This includes some of the company's obligations but excludes transactions arising from the payment of any fees required by law.
By applying for dormant company status, you can reduce administrative burdens, cut costs, and retain the integrity of the company for potential reactivation in the future. If you have more questions or need professional guidance, please feel free to consult with us.
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